Weren't they blowing out the 30GB models for $99 or something like that?

True, but at least it's starting to prove that their business model is viable over the longterm.

Just cut the RRoD crap next gen. 

See my sign.

How do you not post a profit when your consumer base just spent $4.8B on your brand? I'll go the conservative route and and say....mm $175M - $200M. Maybe?

 Passing Thought

How are accessories sold, are they retailed on the same "loss-leading" model as the console itself or is done at a profit from the get go?

If your strategy requires you to release a system with no hitches in order to generate a profit, you are setting yourself up for failure.  MS isn't exactly known for reliability, quality or consistency, so they should probably pay special attention to those areas rather than undermanning those areas and shipping in a hurry despite known problems.

MS may feel justified sweeping the repair cost under the rug this time around.  Perhaps next time there will be something similar to sweep under the rug.  It's not exactly a surprise that MS has had 6 or 7 consecutive years with ~$1 billion in losses average per year.  Why should they sweep it under the run and come out bragging about a profit they made just for this fiscal year? 

That was right after Black Friday. After those stocks got cleared out and prices went up, folks were still buying them. Coming from someone who repairs MP3 players, the Zune is a sweet player. It's got a much bigger screen than the iPod and has built-in wifi ...

OT - I think folks are still downing MS's past loss - and don't want to imagine them profiting in the H&E division. If it's profitable, and I believe it is, MS is starting to turn the corner. 

Well, there's a difference between "hitches" and "30% failure rate". One can be handled while maintaining profitability. The other cannot.

Also remember that MS is very new to the hardware side of things. It's not shocking that they have screwed up a fair amount over the past 7 years. Expect that to slow as their Zune/Xbox divisions get a lot more experience designing hardware that doesn't crap out in a year.

And can we stop talking about the original Xbox's losses now? Back in 2001, MS fully admitted that they never expected to turn a profit on that machine. That money was forfeit before MS even spent it. They fully expected what they got (well, they probably didn't expect the Nvidia lawsuit). 

 No, it's a well known fact that accessories are sold at a profit.

Despite an undermanned QA/testing division, the failure rate was known before MS decided to go forward with production and shipment.  Microsoft cannot say they were surprised by the 360 reliability, since they signed off on it and decided to ship anyway.

The profits of the division as a whole since the inception of the orignal Xbox are relevant, because Microsoft intended to not only profit with the second generation Xbox, but to cover the losses of the first generation Xbox with that profit, setting up their division to have generated a profit overall by the end of the second generation. 

The fact is that they haven't managed to find a single year of profit admid between $6 billion and $7 billion in losses since they began the project.  And right now, they're setting themselves up for a paper-profit.  Regardless of whether or not this is intended to convey future profitability, it's not really a profit.  The division literally ran up a loss in FY08, regardless of how MS spins their accounting to hide that fact.

Considering that they released their biggest IP through their most talented second party, who is now no longer a second party, and *still* had to hide the fact that they aren't truly profitable suggests that this isn't going to convey future profitability.  Not yet, anyway.

Once MS has an honest-to-God profitable year, all in, then they can look at recovering the billions of losses they've incurred so far.  Until then, they're just incurring more losses. 

You obviously don't know anything about accounting... 

If you are talking about the $1.1 Billion RRoD charge...  Doesn't it make sense to charge the $1.1 billion to the timeframe in which the faulty consoles were sold?  Seems to me that's where the charge should be not in some future fiscal year when you physically pay for it.  Essentially, they took profit from the year in which they sold most of the faulty consoles and said, "We are earmarking it for repairs because it is not real profit if we collect money for a substandard product and then end up using future revenue to pay for it".  Companies that rely on future revenue to pay for past mistakes go broke.  Companies that set aside the money up front admitting the mistake stay in business.