There's a reason why the practice of explaining how a football team could have won a game they lost-- after the fact-- is armchair or Monday morning quarterbacking.

That should be kept in mind when reading the Monday Morning CEO column at Red Mercury.

However, that doesn't mean there aren't a few salient points sneaking about.

The point of the MMC piece from May 20 entitled Xbox Economics seems to be that the Xbox isn't exactly a hit-- and that consoles that aren't a hit tend to end up being quite a bit less than just not a hit .

It also picks up one interesting technical point that gets glossed over a lot when comparing the approach of MS to the Xbox's design to the more traditional console approaches of Sony and Nintendo:

It appears that Microsoft is in a dangerous price war that it is losing. But what would happen if one of their competitors suddenly combined two of its major computer chips in to one chip, tripling the output of their manufacturing plant? That competitor's costs would fall dramatically, and they could drop the price of their console much faster and much lower than Microsoft could.

Sony has done exactly this with the Playstation 2. Two of their largest chips will now fit on to one chip. Sony invested $1 billion in their own chip fabrication facility. Now you know why. Microsoft, on the other hand, grabbed a bunch of off-the-shelf chips from a variety of vendors and shoved them together in an absolutely huge, expensive, heavy box that looks a lot like a PC and would probably maim a small child if it fell off the top of a TV. Even if Microsoft could combine the nVidia graphics chip with the Intel CPU, do you think nVidia and Intel would go for this? These chips are owned by different (competing) companies, and the chips are manufactured in different places. If this combination were even physically possible, it would never happen for obvious competitive business reasons that are completely out of Microsoft's hands. Microsoft's box is, and will continue to be, expensive to make, because they don't control the silicon. They will not catch up to Sony or Nintendo on manufacturing costs.

Interestingly enough, MS' approach to building the Xbox was very similar to that of IBM's towards producing their own PC: parts-bin innovation. They took off the shelf elements to put something together as quickly as they could to get in the game against Apple. And although they eventually ended up with a whole host of clone companies to compete against, today the Wintel architecture clearly owns most of the PC market. Which isn't to say MS would welcome Xbox clones... but the proprietary natures of Sony's and Nintendo's hardware designs does allow them more control over costs.

So, give the article a read, but with equal parts Xbox Kool Aid and salt.

Thanks to FunkDaddy who pointed out the article in the HBO forum, and to Ferrex who provided counterpoint.