Microsoft admits gaming and entertainment division will see an initial loss

Microsoft admits gaming and entertainment division will see an initial loss

Microsoft Corp. has announced that it will be spending billions of dollars more that what was expected in order to catch up with Apple Computer in the music business. Microsoft has already acknowledged that there will be another year of losses for its entertainment and devices unit before it starts to show some profit.

With Microsoft's music player, Zune, to be launched later this year, a company executive has said that they will have to invest more into the product and predicted that positive results will be seen in five years. Though the product will incur short-term losses, Microsoft is confident that in the long run, Zune will overtake iPod and become the largest selling digital music player.

Robbie Bach, who is the president of Microsoft's Entertainment & Devices Division, said, "It is something that is going to take time. This is something that's going to be a three-, four-, five-year investment". With Microsoft now handling the production of hardware, there were concerns that this would alienate the device makers many of whom are partnered with Microsoft in other venture.

But Microsoft Chief Executive Steve Ballmer denied that this would harm the relationship saying, "For better and for worse, there's no other company that would be attempting to get into that business at this time. Nobody else has the optimism, nobody else has the financial resources, and you might say nobody else, you know -- well, let me just leave it at that."

Analysts felt that Microsoft missed an opportunity since it did not show a prototype of Zune at the meeting. Thos means that Redmond perhaps missed a chance to drum even more interest in Zune. Steve Ballmer admitted that Microsoft was busy multitasking. "There really is a Sony that lives inside of us, and there's an aspiring Yahoo! or Google that lives inside of us, and there's an IBM mainframe-software business that lurks inside of us, and there's a desktop-software business — where we don't have a lot of peers — that lurks inside of us," Ballmer said at the meeting attended by at least 300 analysts.