Well written response, but the comment about CDS is not correct.

CDS are nothing but swap contracts or a transfer of incremental value from one party to another. There is 50trn of outstanding notional value in CDS but it isn't an indication of current cash at risk. It is nothing but an insurance contract.

Now, while there was silly insurance contracts written (the cause of the fall in the monoline insurers and AIG) the whole CDS market is not reflective of that. It is quite effective at moving risk from one party to another.

Confidence is at a low because people have realised that debt has accumulated to an unsustainable level. The deleveraging of the economy is painful, and we are lucky that we have good government to manage this process at a slower pace. What caused the great depression was that the deleveraging was not handled at a slower pace and the government (through lack of knowledge) encouraged the voracious repricing of risk at too fast a pace.

Firstly, revenues don't get paid out from revenues, they get paid from after tax profit.

Secondly shutting down a division after absorbing the sunk cost of setting it up would upset a number of shareholders as you have effectively thrown away those 'billions of dollars'. They've set up a division that is now profitable and that you could pretty easily justify the good growth in that profit given the product which they have in the market.

If you were a shareholder given your attitude you would have dumped your stock on announcement of the xbox project. If, on the other hand, you were an investor that wanted Microsoft to pursue growth options and effectively use their capital at hand you would support the xbox project.

But your argument of shutting it down now makes no sense what so ever. If you were a shareholder that just wanted no growth and big dividends you would have sold out already, but if you are still in there and only complaining NOW when the division is turning a profit, anyone would look at you thinking "what the hell is this guy on about?"

This is exactly what investment is all about. But what you fail to understand is that not only will the profit persist, but it will probably grow. I couldn't think of a project set up by any company that didn't require up front sunk cost to implement. The fun in financial modeling is getting the future cash flows positive so that there is a positive return on initial investment. Microsoft seem to be making that happen. As a shareholder, I would be happy with that outcome.