Too many assumptions. The $550 is the material cost. Like my truck. It's transmission went bad. As such, it cost me $530 in parts and $670 in labor. Obviously the xbox is not as labor intensive but a reasonable guess would be the 360 was originally produced with $550 materials and a total cost of $700.
Why wouldn't you speculate that most of the R&D costs are actually due to the major xbox redesigns? If you assume that most of it is due to the Zune. We'll say that $1 B is due to the zune. And the Zune sells about 1 million units a year, so that is a whopping cost of $1,000 in R&D due to the Zune. That's before you take into manufacturing costs of each unit. Are they really losing $1,000 per Zune?
This is the math I like: Software, accessories, zune - Profitable assume $0 because it lessens possible Xbox losses.
Total 2007 loss for the year $2 Billion. Subtract one time warranty charge of $1.1 billion. Approximately 10 million xboxes sold. .9 billion loss / 10 million = $90 loss a unit. So can xbox afford this price cut, yes they are Microsoft. But their is no way they make money on hardware with the drop.
