Microsoft is probably making money on its hardware, since it's had two years to do cost reductions. The problem is, their penny-pinching and arrogance resulted in a disastrously inferior and crash-prone hardware design, which has already cost them $1.1 billion (maybe it will be more, we don't know). And that's why Japan and Europe won't buy 360s. They have more of a culture of quality there - think Toyota and Mercedes. The PS3 really is a top quality media machine and a really excellent BluRay player, built to last, so it's been successful in those regions even at its high price point.
I'm pessimistic about the 360, not because I dislike the platform - it's a wonderful system with terrific games - but because Microsoft is run by jackasses. I don't blame Microsoft's game division - they have some sharp people who came up with a wonderful machine with immense potential.
But Ballmer and the suits could have spent the money to create a decent product. They didn't. In fact, they haven't taken a single ounce of responsibility for any of their monster screwups - prematurely killing off the Xbox (hell, come up with a model which doesn't have a harddrive, how hard could that be?), treating Bungie so badly that Microsoft's biggest franchise left the company (again, how hard could that be?), RRoD, etc. Those are all self-inflicted failings.







