MS is selling the Xbox 360 about 10 dollars below the total bill of material (BOM) that went into making the Xbox 360. This was analyzed by the firms iSupply and Portelligent.
The total break up of the Xbox 360 as listed by iSupply is as follows:-
For Xbox 360 Premium Edition Integrated Circuits : USD 340
IBM triple-core PowerPC processor : USD 106
Adding the hard disk, DVD Drive, Radio Frequency, enclosures and other materials, the total manufacturing cost touches USD 525! This is far beyond the current retail price of USD 399.
For the Core Edition of Xbox 360, Portelligent estimates that the total hardware cost-of-goods sold (COGS) is approximately US$310, based on its own product teardown analysis - a difference again of about 10 dollars .
Portelligent however thinks that MS is relying on sales of higher-margin bundle systems, accessories, and games to turn the financial picture positive.
Microsoft, according to Business Week has however declared that it expects to break even on all Xbox 360 items like the console, games, software accessories etc by end of 2007 which effectively means there would be no profits for the company till then.
By the looks of it, MS is just trying to be in the contention for the top spot of the gaming console industry and work towards its resolve to beat Sony in the near future. Then, as we have seen it doing with Windows where it sold the software at much lower prices initially, distributed the IE and other software bundled with Windows OS freely & allowed rampant piracy by turning a blind eye to countries like China, India and even a large part of Europe in the mid-90s through 2000. With this ploy it will try getting a monopolistic stranglehold on the console and gaming industry.
The pattern is all too familiar of MS's way of doing business. What do you say? Do let us know, we shall love to hear from you.
News : DigiTimes
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