Microsoft to “channel inventory drawdown for Xbox consoles,” says CFO

By Stephany Nunneley, Friday, 25 April 2014 14:51 GMT

Microsoft CFO Amy Hood said during the company’s Q3 FY14 call to investors last night there are plans to “channel inventory drawdown for Xbox consoles”.

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A drawdown in inventory is when a company reduces the available amount of inventory. Drawdowns can help determine the company’s financial risk, and in this case, the drawdown discussed by Hood implies Microsoft has more inventory that it can push at the moment; therefore, it has the option of doing one of two things: slow shipments to retail down or slow or stop the manufacturing process.

Companies can also implement other ways in which to move inventory through marketing pushes and consumer incentives – like sales or price reductions. None of these methods were elaborated upon by Hood, so it’s unknown at present which route the company will take.

“Xbox One has sold in over 5 million units since launch and engagement has been high with users spending nearly 5 hours per day on their console,” said Hoot. “We will continue to extend the unique entertainment value proposition of Xbox One, particularly in markets outside of the U.S. where some services aren’t as mature.

“Xbox 360 sales exceeded our expectations this quarter. And across the platform, Xbox Live members continued to embrace the service with transactional revenue growing 17%. We do expect to work through some inventory in Q4.

“Devices and Consumer licensing, we expect [Q4] revenue to be $4.1 billion to $4.3 billion. In hardware, we expect revenue to be $1.3 billion to $1.5 billion in what is a seasonally slower hardware quarter.

“This number also reflects channel inventory drawdown for Xbox consoles. In devices and consumer other, we expect revenue to be about $1.9 billion.”

Microsoft announced last night its Devices and Consumer Hardware sector, which houses Xbox consoles, reported $1.97 million in revenue for Q3 FY14 and $8.19 million for the nine months ending on March 31.

Devices and Consumer revenue grew 12% to $8.30 billion with 2 million Xbox console units, including 1.2 million Xbox One consoles, sold-in.

Via MCV, Seeking Alpha.

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