The 360's Redesigned Hardware: Takahashi with the scoop

[RepoMan]

Good old Takahashi! (http://blogs.mercurynews.com/aei/2007/07/microsofts_next_move_code-name_falcon.html)

Microsoft is in the process of qualifying the new Falcon chips and motherboard this summer. I expect it will launch Xbox 360s with the new Falcon innards this fall. That is why the company has been able to say that it has solved its manufacturing quality problems. Microsoft is likely to spend a little more money on heat sinks to make sure that the overheating problem doesn’t resurface with Falcon....

It’s anybody’s guess as to what Microsoft will do with the Falcon as its base platform going forward. But Sony had better watch out. Microsoft is moving ahead of Sony on the cost-reduction curve. It would be risky for Sony to get into a price war with Microsoft.


Now it’s easier to see why Microsoft still expects to be profitable in fiscal 2008 with the Xbox 360 business. In this fiscal year, Microsoft will introduce a major cost reduction with the Falcon platform. It will launch Halo 3. And it has already written off in fiscal 2007 the costs of repairing consoles for the next few years.
So the big question is, are they going to try to soak up the profits from the cheaper hardware, or are they going to drop the price right away and try to grab the market share while the grabbing's good? Either way, hopefully this is the turning point for the Ring-of-Doomed 360.

[wumpus]

Sweet, hopefully by the time I need an Xbox 360, I can pick up one with the redesigned innards in November or so. That was my plan all along-- take that, early adopting suckas!

[Moggraider]

But we'll have played our 360's for two years by then.

This redesign news isn't surprising considering how disadvantageously the GPU is placed in the existing model.

[PeterGinsberg]

Naturally this happens just a couple weeks after I got my new Elite. Ah well, I can look forward to exchanging it when it inevitably dies.

[Jim Preston]

Interesting article. Thanks for the link.

[MyNameIsWill]

You know, I knew this


And it has already written off in fiscal 2007 the costs of repairing consoles for the next few years.

but it didn't dawn on me how significant it was.

[Gladguy]

At least someone in "The Industry" is doing actual, y'know... journalism.

[Kunikos]

Just in time for a cost-reduced Mass Effect. XD Awesome.

[Kalle]

Someone explain to me how this whole "writing off the fiscal year" isn't just fiddling with the books to keep the good news coming in next year.


We're making a profit this next fiscal year! Just ten more years before we've climbed ourselves out of the 2007 money abyss!

[Skipper]

Someone explain to me how this whole "writing off the fiscal year" isn't just fiddling with the books to keep the good news coming in next year.

You've got it in a nutshell, no need to explain it to you. To put it in perspective, it's taking money from other Microsoft divisions and ... shareholders ... in order to "write it off." They incur the charge now instead of spread out over the next few years. All public companies are bound to the shareholders. This is a pretty significant hit to the ones that own M$ stock this year.

[rjcc]

Someone explain to me how this whole "writing off the fiscal year" isn't just fiddling with the books to keep the good news coming in next year.

no, you've pretty much got it.

[MyNameIsWill]

Someone explain to me how this whole "writing off the fiscal year" isn't just fiddling with the books to keep the good news coming in next year.
Accrual accounting. (http://en.wikipedia.org/wiki/Accrual) They're allowed to use this because they've already sold the consoles and they know that a certain percentage of these consoles (for which they've already recorded revenue) are coming back to get fixed. In summary, they know the expense is out there, they're just waiting for it to materialize. I hope that makes sense.

It would be cooking the books if they simply moved this money to a reserve and used that reserve to inflate earnings in the future (something Microsoft's done before (http://www.trinity.edu/rjensen//theory/00overview/AccountingTricks.htm)).

[Kunikos]

This is a pretty significant hit to the ones that own M$ stock this year.

I think they lost their diamond plated dollar sign S a while ago.

[Jazar]

We're making a profit this next fiscal year! Just twenty more years before we've climbed ourselves out of the 2001-2007 money abyss!

Fixed.

[Jason Cross]

There's not really a lot of new info in this piece. It tells us one thing we all already knew (the three main chips are going to 65nm, and they're the most expensive things in the console). It tells us one new thing in that the internal code name is Falcon.

The rest is just "what would 65nm chips let MS do?" which are all things we have all said here (and elsewhere on the web) before. Less power draw means smaller power supply or maybe integrating it into the hardware. It means lower cost to MS so it's easier to justify dropping the price. It means better reliability. They article says they're qualifying chips and mobos now, which is news, but it's also months behind their expected time frame for doing so.