Eventually it adds up to real money. Two news reports out about the financial health of two the fierce competitors in the console wars. Forbes is reporting that the bond rating service Fitch has downgraded Sony's corporate bonds from A-minus to BBB-plus.
"Fitch expects Sony would need a longer time to restore its underperforming electronics operations, while its game segment will likely incur large losses over the next three to five years given the huge investments and intensifying market competition."
Joystiq is running some pre-chewed analysis of the news for those of you who do not want to wade into the financial lingua franca that is Forbes. Basically Sony's bond are near junk status and it is going to be harder and more expensive for Sony to raise new money.
Next-Gen is running a related story on Microsoft's relative unconcern with it's mounting and massive loses in its game division. Microsoft’s game division lost $485 million in 2005 and $1.26 billion in fiscal year 06.
Microsoft COO Kevin Turner stated, "All this money keeps piling up and giving it to the games group is faster than burning it."
Ok. Ok. That's not true. Instead Turner gave some corporate nonspeak about, "multiple pillars for growth" and "[Microsoft] is committed to sticking to things that we believe in. " Microsoft doesn't really have a bond rating, because ... well .. they don't have to borrow money. I am not sure what the last count was, but I think Microsoft has about $40 billion in cash laying around.
I have brought up these themes before. Microsoft is just going to spend Sony into oblivion. Maybe not this round, but with an unlimited amount of money no competitor can keep pace forever. Thank you Seamus Blackley for getting all this started.