R&D and a lot of loss making businesses

My guess would be Windows Mobile 7 is a big chunk of R&D.

yeah i was looking at windows mobile 7 on the wiki page and was thinking that it couldn't be very profitable compared to how much it would cost to develop and maintain.

@grimes, same as above.

Natal is more than just the hardware, it's about the software which they've been workin on for years. There is a lot of R&D on products that we haven't heard of.

I'm hoping the courier is one of them, that thing would rock!

Seems like a decent quarter.

Detailed Breakdown of it all

Revenue from gaming: 1,038m

Profit increased mainly due to decrease in costs of producing xbox offset slightly by increased xbox live costs

474m was spent on R&D

Entertainment and Devices Division

*   Not meaningful

Entertainment and Devices Division (“EDD”) offerings include the Xbox 360 platform (which includes the Microsoft Xbox 360 video game console system, Xbox 360 video games, Xbox LIVE, and Xbox 360 accessories), the Zune digital music and entertainment platform (including Zune HD, which was released in September 2009), PC software games, online games and services, Mediaroom (our Internet protocol television software), the Microsoft Surface computing platform, Windows Mobile and embedded device platforms, and other devices. EDD leads the development efforts for our line of consumer software and hardware products including application software for Apple’s Macintosh computers and Microsoft PC hardware products, and is responsible for all retail sales and marketing for Microsoft Office and Windows operating systems.

Three months ended March 31, 2010 compared with three months ended March 31, 2009

EDD revenue increased primarily reflecting an increase in Xbox LIVE revenue and non-gaming revenue, offset in part by decreased revenue from Xbox 360 video games and decreased Xbox 360 consoles sold. Non-gaming revenue increased $77 million or 14%, primarily reflecting increased sales of Windows embedded device platforms and PC hardware products. The decreased revenue from Xbox 360 video games was due primarily to the launch of Halo Wars in the third quarter of the prior year. We shipped 1.5 million Xbox 360 consoles during the third quarter of fiscal year 2010, compared with 1.7 million Xbox 360 consoles during the third quarter of fiscal year 2009.

EDD revenue for the three months ended March 31, 2010 included a favorable foreign currency exchange impact of $62 million.

EDD operating income increased due mainly to a $199 million or 22% decrease in cost of revenue resulting primarily from lower Xbox 360 console costs, offset in part by increased online costs resulting from increased Xbox LIVE activity. Research and development expenses increased $31 million or 7%, primarily reflecting increased headcount-related expenses, partially offset by decreased third-party development and programming costs.

Nine months ended March 31, 2010 compared with nine months ended March 31, 2009

EDD revenue decreased reflecting decreases in Xbox 360 platform and PC game revenue, as well as decreased revenue from the non-gaming portion of the business. Xbox 360 platform and PC game revenue decreased $240 million or 5% due mainly to decreased Xbox 360 consoles sold, decreased revenue per console, and decreased revenue from Xbox 360 video games, offset in part by increased Xbox LIVE revenue. We shipped 8.8 million Xbox 360 consoles during the first nine months of fiscal year 2010, compared with 10 million Xbox 360 consoles during the first nine months of fiscal year 2009. The decreased revenue per console resulted from price reductions during the past 12 months. The decreased revenue from Xbox 360 video games was due primarily to the release of three significant games in the prior year compared to two significant games in the current year. Non-gaming revenue decreased $80 million or 4%, primarily reflecting decreased sales of Window Mobile device platforms and Zune digital music and entertainment devices.

EDD operating income increased due to reduced operating expenses, offset in part by decreased revenue. Cost of revenue decreased $779 million or 19%, primarily due to lower Xbox 360 console costs, offset in part by increased online costs resulting from increased Xbox LIVE activity. Research and development expenses decreased $82 million or 6%, primarily reflecting decreased third-party development and programming costs. Sales and marketing expenses decreased by $60 million or 6%, primarily due to decreased marketing for the Xbox 360 platform.

he just confirmed natal for first half of fiscal yr 2011, not that we didn't know that before.

how they handle the money from months paid in advance

Unearned Revenue

Unearned revenue at March 31, 2010 comprised mainly unearned revenue from volume licensing programs. Unearned revenue from volume licensing programs represents customer billings for multi-year licensing arrangements, paid either upfront or annually at the beginning of each billing coverage period, which are accounted for as subscriptions with revenue recognized ratably over the billing coverage period. Unearned revenue at March 31, 2010 also included payments for: unspecified upgrades/enhancements of Microsoft Internet Explorer on a when-and-if-available basis for Windows XP; post-delivery support and consulting services to be performed in the future; Xbox LIVE subscriptions; Microsoft Dynamics business solutions products; unspecified enhancements for Zune HD; the 2010 Microsoft Office system technology guarantee program; online advertising for which the advertisement has yet to be displayed; Mediaroom; and other offerings for which we have been paid upfront and earn the revenue when we provide the service or software, or otherwise meet the revenue recognition criteria 

Xbox 360 slim + NATAL for 300 dollars certainly for end of the year, Microsoft will make 50-70 dollars profits for each Xbox 360 + Natal sold.

Natal cost 50-70 dollars to produces, and with studio which work for end of the year Microsoft will take a part of their revenu.

Prédiction Natal sell in three years : 15 millions + 100 millions Natal Games.