The Xbox division is about 7 billion in debt -- the latest 1 billion was due to the additional costs incurred by the RROD issues. This does include some fairly costly acquisitions, most notably Rare.
Microsoft has not yet had a profitable quarter with the Xbox division, but because they front-loaded all of their repair costs into last year, they may be able to have an 'on-paper' profitable quarter this quarter with Halo 3 launching. Some analysts are indicating Microsoft could have a 'slightly profitable' quarter.
This, of course, does not indicate they'll have a real profitable year, but it is the first step. Nor does it indicate that they'll generate a profit from the Xbox 360 generation. However, Microsoft has some investors that want to see them get at least one year of profitability of any kind.
Microsoft is unique among the big console companies as they're the only one consistently operating at a loss. Nintendo hasn't had a year without big profits for a long time and Sony hasn't had two consecutive years of loss with its playstation brand.
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