Microsoft Reports $400 Million Loss on Xbox One

Hit on gaming device may foreshadow future peril for the enterprise

Xbox One might not be the juggernaut gaming console that Microsoft hoped it would be. The Redmond, Wash.-based technology company's earnings report for the last fiscal year shows it spent $400 million more than it earned trying to get gamers interested in the Xbox One.

While Xbox console sales increased from 9.8 million units in 2013 to 11.7 million units in 2014, manufacturing and distributing costs went up to $2.1 billion while platform revenue only reached $1.7 billion. The news is coming hard on the heels of the earlier announcements that it would lay off 14 percent of its workforce—largely related to its Nokia acquisition—and shutter its Xbox TV studio

Today's headline suggests that Microsoft may have to throttle back its ambitions, at least when it comes to the gaming console. On Xbox One's website, the device is marketed as a way to use multiple Microsoft products and services simultaneously. "Talk with family and friends on Skype while watching TV," it suggests, or do a Bing search while playing a game.

But, in an interview with the Financial Post at the E3 consumer electronics show last month, Xbox strategy head Yusuf Mehdi acknowledged that a number of non-gaming features had to be removed from the XboxOne, such as app streaming and digital game purchasing, in response to user feedback. To win over gamers who only want to play games, Microsoft also removed its bundled motion capture device Kinect in May so it could lower the price of Xbox One to match market leader Sony PS4. 

Despite losing nearly half a million dollars on the Xbox One since its launch last fall, Microsoft itself still has plenty of cash to spare. It still reported revenue of more than $23 billion last quarter.