Analyst: Microsoft Loses $2 Billion on Xbox Annually

Nomura analyst Rick Sherlund says that Microsoft's losses on its Xbox business total $2 billion per year, but are masked or hidden by substantial cash generated from royalties on patents from Android-based devices.

"If we start with the overall traditional [Entertainment and Devices Division] business that actually loses money before corporate allocations and back out the nearly $2 billion 95 percent gross margin Android phone royalties, we conclude that Xbox platform plus Windows phone and Skype lose about $2.5 billion per year, and we estimate that the Xbox platform may account for roughly $2 billion of this," Sherlund said.

He goes on to say that this loss "is concealed by the hugely profitable Android royalties" that come out of licensing deals on Microsoft-held FRAND patents related to the Android OS.

Source: GII by way of The Escapist

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