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DKII said:
One nitpick - the extended warranty cost is being written off to the previous fiscal year that ended this week, so won't affect MS's profits for this year.

Both Sony and MS are planning to make profits through things besides just hardware and software now, primarily advertising in the interfaces and inside the games themselves. MS of course gets more income from Live and a lot of accessories.

 To be fair, he said it would offset any profits from the coming year. MS had hoped for net profitability this cycle, a prospect which is steadily sipping away.

 Of course, an early price drop may kill any chance of a profitable fiscal year in any case.