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To: Mihaela who wrote (67122)	3/6/2001 3:37:25 PM
From: Mihaela	Read Replies (1) \| Respond to of 93625

dailynews.yahoo.com Tuesday March 6 3:20 PM ET Microsoft Xbox Payoff in 5 Years SEATTLE (Reuters) - Microsoft Corp. (NasdaqNM:MSFT - news) will lose $2 billion on its upcoming Xbox (news - web sites) video game console before it breaks even in about five years, when it could add as much as $1 billion a year to the software giant's bottom line, a Wall Street analyst said on Tuesday. ``Although we think Xbox represents a big opportunity, we do not believe it will become a major contributor to operating profit in the next five years,'' Merrill Lynch analyst Henry Blodget wrote in a summary of a new report on the machine. ``Moreover, near-term, we believe it will require substantial investment. We estimate $2 billion in losses before break-even in FY2005,'' Blodget wrote. Microsoft shares were up $2, or 3.5 percent, at $59-7/16 by mid-afternoon on the Nasdaq, amid a broad tech rally. The shares have tumbled from a year high of $115 last March, driven down by slowing revenue and profit growth at the world's biggest software company, which made its fortune with the Windows computer operating system. The Xbox, Microsoft's much-anticipated entry into the fiercely competitive video game market, is one attempt to reignite growth. The device will go head-to-head with Sony Corp.'s (6758.T) PlayStation 2 (news - web sites). The machine is expected to go on sale in the second half of the year, about the same time that Nintendo (news - web sites) Co. Ltd. (7974.T) plans to launch its new GameCube system. Microsoft has said it will spend $500 million to market Xbox the first year it is on the market. If successful, Xbox could rake in $500 million to $1 billion in operating income, or 6 to 11 cents per share, by the 2006 fiscal year, accounting for about 5 percent of Microsoft's total profit, Blodget said. Although Microsoft is expected to try to make up for its later entry by highlighting the quality of its games and ease of use for game makers, it will have a tough time dislodging Sony from its perch atop the industry, because the PlayStation 2 will have had a year head start, Blodget wrote. ``Even if the Xbox experience is truly 'better' for developers and gamers, however, we believe that overcoming Sony's installed-base advantage will be challenging,'' Blodget wrote.