Well, they did say they hope to be profitable in terms of hardware, in the next fiscal year. That was in their latest financial report conference, where it would be pretty damning if they lied.

Not only damning, but criminal.

And why would you imply that your system is not making a profit if it actually was?

Yes, Microsoft is doing this on purpose.  Businesses certainly don't work by accident - not to say that happy accidents don't happen, but there was a clear strategy this Christmas: Sony had lost nearly all of it's big holiday games (GTA 4, Final Fantasy and Metal Gear) and Microsoft still had Halo 3, Mass Effect and more...so Microsoft didn't do a huge price cut, just enough to force Sony to follow, and it let the games do the rest. 

Starting what already? Stop trying to instigate situations and let people have their opinions.

Masssive LOL at Microsoft bleeding out Sony XD, man thats some funny stuff :)

Didn't Sony announce some 700 million dollar profit amongsts all its divisions this year on TOP of R&D losses for Cell tech, Blu-ray, PS3, and Oled? Sony has too many roots to be "afraid" of Microsoft, if anything I'd say microsoft is heading twards the pickle, theif OS is losing market percentage, zune ... be honest, do you own one >_>? Seriously guys if Microsofts goal is to "Bleed out" sony's PS3? Then why bother trying to boot out a hardware company >_>;;; this is the road they pave, the ps3 just happens to be on the way. When microsoft wises up and stops putting out a shoddy product, I'll think about giving them more credit. But hell until then -_-

Microsoft gave 1st quarter of 2008 as the time that they hoped to break even, of course I also don't think that this most recent quarter will mean a whole lot as far as the current one being profitable b/c halo 3 is over and done with.  Either way you look at it, the 360 has been out for a couple of years already which suggests that the PS3 has a good chance of becoming profitable in less time.

Here is my prediction:

MS is content as long as it out sells the ps3 in NA. As soon as that changes watch for a $50 price cut + massive adds. Europe is so close these days looks like it is a draw. Japan for MS.. Well I think they are just hoping to break 1.5mill over the 360s life time.

It isn't really criminal to give a false impression of one's expectations for future profitability.  You must be confusing the falsification of past financial data with future expectations, because lying about what actually has happened is against the law.

Even if M$ is losing money on the consoles, I get the feeling they're making up for it in terms of software sales AND the XBox Live accounts + Live games and the like. Nintendo just happens to be making a profit on everything.

One of the big issues on this generation of the console wars is that wins aren't only based on hardware and software numbers alone. Right now, I can only think of 3 ways that a winner can be determined:

1) One console takes the lead on multiple fronts (Like the Wii overtakes the 360 sales in America, and catches up in terms of Software sold as well)
2) All 3rd party developers drop exclusive support for a console, or completely stop developing for a console at all (M$ seems to have the least to worry about in this. Nintendo has a bad history with 3rd party support, but Sony has already lost an exclusive or two, and there has been talk about losing other titles as well)
3) The company themselves announce that they are no longer going to support their own console due to lack of profits (no way this will happen for 360 and Wii, but I still don't see this happening even for the PS3)


I think M$ is scrabbling hard, since it's lost its lead to Wii, it needs to ensure that it's got a STRONG 2nd place, or it's going to get drawn into the same type of thing that happened last gen, where it was basically tied with Gamecube in a distant 2nd/3rd compared to PS2. If M$ allows Sony to catch up, then the PS brandname, and the fact that it managed to catch up even with the 360 launching a year earlier, people will likely see the PS3 as the stronger console.
It's not that M$ is trying to bleed Sony on purpose, but they're trying to establish themselves as being conclusively better, to ensure that they don't allow sony enough chance to catch up, and then surpass them.