Microsoft is often accused of being a two-product company–Windows and Office make up the bulk of its revenues and most of its profits–but the company actually has nine other businesses that garner $1 billion a year in revenue, mostly in enterprise software like SQL Server and Exchange Server.The company counts the entire Xbox franchise as one of these businesses, and the actual Xbox console passed $1 billion way back when it launched in 2002–of course, it was also a huge money loser, as Microsoft sold the boxes below cost. But earlier this year, Bloomberg calculated that the Xbox Live service was also collecting $1 billion a year with a combination of subscriptions and online purchases.
Now Microsoft can add Kinect to the list: it’s shipped 8 million to retailers, so it’s a safe bet that actual sales to consumers will pass the magic number of 6.66 million soon. At $150 per sale, that’s a billion in revenue. In less than a quarter on the market.
What about operating profit? Each Kinect only has about $56 worth of components, according to a teardown by TechInsights. Even if you add in launch marketing campaign that probably cost several hundred million dollars, it’s still ahead.
Sure it’s not going to be Windows or Office with 70% margins. But it’s a nice little business, and proof that Microsoft can make money with a pure consumer product. Look for more on its next earnings call on January 28.
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