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Microsoft Entertainment division posts profit

Microsoft, as part of its larger earnings report today noted that for the fiscal year ended June 2008, the Entertainment and Devices Division, home of the Xbox 360 and Zune had a USD 426 million profit for the year.

The division had a loss for the Q4 despite a huge surge in revenue but the loss was much smaller than years past. For the Q4 2007, the division reported an operating loss of $1.223 billion USD but that dropped to $188 million USD for the 4Q this year.



Revenue was up 34 percent to $8.15 billion USD and the software giant attributed the surge to higher sales of the Xbox 360. The company shipped 1.3 million consoles during this Q4, compared to 700,000 in Q4 2007.

Operating profit was so low because of a large $1.1 billion USD charge taken by the company relating to their decision to expand the warranty coverage of all 360 consoles.

Written by: Andre Yoskowitz @ 18 Jul 2008 14:37

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• 7 comments

• iluvendo

  How did they make a profit ? On print, MS says they lose money on every console, yet they shipped more consoles than before, and now they show a profit, even when taking a $1.1 billion charge. MS does funny math in their accounting practices !

  18.7.2008 15:11 #1

• Stu_dent

  Microsoft, infact all console makes usually make a loss on their consoles when they are first sold and usually make the money back from software sales, i think the only execption to this is the Wii which i think made profit from the go.
  
  I think its been a long while since microsoft has been losing money on the 360 and i think you will probably find that they are in fact making a porfit on each console, this will be down to reduction of manufacturing costs and the like.
  
  On a similar sort of topic I think i remember reading that sony is getting close to making a profit on each ps3, however i think that will be cancelled out with the price cut on the 80GB model

  18.7.2008 17:02 #2

• Oner

  It's not a price but on the 80gb it is just a 40gb with a bigger HD and a Dual shock 3.
  

  
  
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  18.7.2008 17:19 #3

• mspurloc

  How do they make a profit?
  
  Halo.
  
  Xbox Live multiplayer, the game sales, downloadables, accessories and merchandise.
  As said here, the consoles are the delivery devices. When you can sell an add-on hard drive that costs you ten dollars for $180, you're going to make a profit eventually.
  
  Of course, there's a little creative accounting going on here, too. Like all smart companies, they have an investment portfolio for each division which offsets costs.
  And remember those "Ring of Death" repair costs? You can bet whatever that actually cost them isn't in their figures.
  Although sales of refurbished machines did wipe almost all of that out, since even refurbed, they sold for twice what they cost to make, ship and repair.

  18.7.2008 17:28 #4

• iluvendo

  Originally posted by mspurloc: Quote:How do they make a profit?
  Quote:Of course, there's a little creative accounting going on
  
  
  Finally a ray of light !
  

  If it wasnt for bad luck, Id have no luck!
  "The flimsier the product,the higher the price"
  Ferengi 82nd rule of aquisition

  18.7.2008 19:15 #5

• mspurloc

  Originally posted by iluvendo: Originally posted by mspurloc: Quote:How do they make a profit?Quote:Of course, there's a little creative accounting going on
  
  Finally a ray of light !To be fair, though, they did stop making the "we're losing money" claim last November. They probably realized they couldn't get away with it anymore, after game sales skyrocketed and they "fixed" the Ring of Death issue. They also got out of the movie business, which they now say they were never in, and that returned some cash to the coffers.
  
  Very stupid, greedy move on their part, ticking Peter Jackson off that way. They destroyed any good will there was for them and they must've realized that.

  18.7.2008 21:06 #6

• Hardwyre

  Microsoft, as a company, will always, ALWAYS make a profit. Bill Gates is a financial genius, and MS is more fiscally secure than the U.S. government.
  
  If there were two people left in the entire world, and one was Bill Gates, he'd have the other guy's wallet before the day was out.

  30.7.2008 12:46 #7