Disspelling XBOX rumors.
03/06/2001 6:16:25 PM MST Albuquerque, Nm
By Dustin D. Brand; Owner AMO
Many XBOX rumors have recently surfaced.
Boomberg recently spread a rumor that the launch of the Microsoft XBOX in Japan would be delayed. The XBOX is scheduled to launch simultaneously in the US and Japan this Fall, 2001. What Bloomberg failed to mention was the following:
#1, the XBOX GPU, MCXP and Intel processors are already in the fabrication process. Furthermore, the actual XBOX has 7 manufacturing plants WORLDWIDE, 1 in Mexico, 1 in Hungary, 1 in Turkey, 1 in Japan, 1 in Sweden, 1 in China, and another. This essentially ensures absolutely no part shortage or time delay in manufacturing.
#2, Bloomberg didn't even ask Microsoft, and went ahead and spread the rumor effectively putting them in slander territory. Opps, bad move Bloomberg.
In an official Microsoft Response, coming from both sides of the Pacific, Microsoft said to CBSMarketwatch;
On Tuesday, Microsoft Japan denied reports the company will postpone introducing its XBox game console in Japan due to a lack of support from game developers there. "We are proceeding with our scheduled introduction of fall 2001 for the Xbox, we envision no delay in that at this time," a Microsoft Japan official told CBS MarketWatch.com. Asked if it had read a Bloomberg report Monday that first mentioned a delayed launch, the official said: "Yes, and our stance here in Japan is that this is not correct. We are proceeding as scheduled."
Another smaller rumor is that there isn't any Japanese support for the XBOX. This simply isn't true, in fact Bandai is even distrubuting the XBOX in Japan using a new company they have formed specifically for that task.
In Japan, heavy-hitters like Konami, Bandai, Hudson Soft, Namco, Koei and others have all committed to the XBox, and many more are expected to announce their support in May at the E3.
Another rumor was that Microsoft was going to lose $2 Billion on the XBOX. Not that this matters because Microsoft can afford to lose $2 Billion regardless, but losing $2 Billion while taking $5 Billion or more from SONY and Nintendo makes sense. Merrill Lynch analyst, Henry Blodget recently said in a report that production costs are expected to be an unusually high $375 per machine because of the console's advanced features. Blodget also estimates that Microsoft will "lose $125 on every XBox console--and that's before taking into account" sales, marketing and other administrative costs. Let me be the first to point out that Merrill Lynch has lost a lot of money this year.
It appears Blodget wrote his report before the Semiconductor sector announced their loses this Monday. In response Intel lowered it's prices by 19%. Microsoft and Intel go way back, and lets say Microsoft ships 1 Million XBOX units by 2002, 19% discount + the bulk order discount + the Intel relationship and Microsoft share equates to an extremely low cost on the Intel CPUS in the XBOX. Furthermore, NVidia and Microsoft also share such a relationship, and silicon right now is cheap, the semiconductor sector is at a low driving prices way down. What about the 8 Gig hard drive? You should know that they don't even sell 8 gigs anymore and that an 80 Gig costs $300 at retail. Divide that by 10 and add in the bulk wholesale discount and you come to around $15 for an 8 Gig. What about the Network card? You can currently buy a 10/100Mbps Network card for $15, but remember this is all placed on a chip in the XBOX so the cost for a card is irrelevant. Maybe $5-10 to produce the NVidia processor that
handles Audio and Networking. What about the DVD player? Don't those cost $200-300 retail? Welcome to the computer revolution. A DVD player in a computer retails at about $250 for the player and a card to decode movies. The DVD player however seperately can cost maybe $100 at the high end and $50 at the low end. Remember the XBOX GPU handles all video, including DVD movie video so there is no need for a card to decode movies. Factor in the DVD player discount from the Chinese and you have maybe $25 for the DVD player. Add all this together and how possibly can you reach a price point of $375? High end DVD players (which the XBOX is) cost way more than $375. Wait a second, I know how this industry works, and it's not your average consumer electronics. It's more like a PC built for games and playable from your TV, FPD, or Computer monitor.
With the prices falling in the semiconductor sector, and the discounts from the other sectors of the PC market there, Microsoft won't take a $125 loss on each unit, so don't speculate. It isn't worth it, you should tell and understand the truth. Expect a price point around $175-250 in competetive pricing with the Nintendo system launching around the same time, and don't expect Microsoft to lose $2 Billion on the XBOX, expect them to make more than 5 times that in sales.
Ladies and gentlemen, there is no coincidence. All of these rumors come shortly after either exclusive XBOX titles are announced or other extremely big titles or developers announce their support or title for the XBOX. Microsoft has the Japanese scared, and thus they are using scare tactics.
Related AMO Articles:
Microsofts' XBOX Online Edge
The XBOX GPU, an inside look.
John Carmack talks about the XBOX GPU
The XBOX has them drooling...
XBOX GPU sent to fabrication
Microsofts' XBOX vs Japan
AMO Looks into the XBOX