What VC would invest $21 billion in a business that loses $1.2 billion a year?
Roger Ehrenberg is claiming that Microsoft's XBox 360 is a financial failure. Why? Because according to his analysis, Microsoft has invested $21 billion in its Home and Entertainment division, enough to finance a significant enterprise by any standard. And the results of that investment? It has a division that loses $1.2 billion a year five years after its founding. Now the way that Microsoft reports its results muddies these results significantly (perhaps by design), but Roger's analysis parallels numbers I've arrived at as well. I suspect any VC worth its salt would have pulled the plug on a portfolio company with those numbers long ago.
Paul Hawken wrote in his 1988 business classic, Growing a Business
(a book I highly recommend, by the way), that too much money is probably one of the worst problems an entrepreneurial business can have, because it tempts executives to buy rather than innovate their way out of problems. If I were Microsoft, I'd be putting a competitive analysis SWAT team to work studying Nintendo, whose Wii is outselling XBox 360 long after the holiday season and is making per-unit profits at a lower price point. Or, perhaps, some of the Microsoft geniuses need to relearn that old business school formula, revenue - cost = profit.
Paul Hawken wrote in his 1988 business classic, Growing a Business
(a book I highly recommend, by the way), that too much money is probably one of the worst problems an entrepreneurial business can have, because it tempts executives to buy rather than innovate their way out of problems. If I were Microsoft, I'd be putting a competitive analysis SWAT team to work studying Nintendo, whose Wii is outselling XBox 360 long after the holiday season and is making per-unit profits at a lower price point. Or, perhaps, some of the Microsoft geniuses need to relearn that old business school formula, revenue - cost = profit.
posted by Carl Howe at
10:08 AM
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