From www.gamesindustry.biz:

Speaking to eWeek, Robbie Bach said: "It's a business that will be profitable next year. We'll make money next year and that will be the first time, which is pretty exciting."

Considering Microsoft lost $315 million in the division 360 is in (Zune too) just for Jan-Mar 2007, this strikes me as a pretty big deal, especially since Bach mentions he expects to make the profit from software revenue offsetting hardware that still sells at a loss.

Also, the article mentions that despite only profiting from software and low hardware losses at first, the hardware itself should break even by the end of the generation.

Hmmm... I guess tales of Microsoft making close to 75 a pop for each premium sold is a lie. No wonder they refuse to drop the price. They need to transition to 65nm cpu and gpu quick. Software is Microsoft's strongpoint now, but Sony and Nintendo will be stepping up their game soon enough.

Well if 360 won't be profitable until 08, its unlikely PS3 will see any price drops any time soon either, because they were losing even more money than the 360

MS claims every year that next year is the year the Xbox will be profitable.  Then next year comes and it magically remains next year that is will be profitable.  It's similar to the joke about Brazil, the Xbox will be profitable next year, and it always will be.

While you're right and you have to start to chuckle at MS each time they say it, I think they might be right this time.

The $75 "profit" on 360 mentioned was purely regarding manufacturing costs, it didn't account for things like marketing, distribution, and retail markup costs.

well he's probably right. However, if they end up dropping the price they will go back into the red. They will never make up all the money they lost this generation, much less last generation. I think that Microsoft is happy just to keep a lead over Sony despite losing money. That would put them in good position for next gen.

I don't think they see this as recouping losses from past years (remember that the company as a whole posted record profit) They run their company similar to mine... don't look to hard at individual losses if it helps out the company as a whole... xbox brand helps microsoft brand name which can help windows and office sales (their bread and butter)... so i think they are willing to swallow a 500 million dollar loss if it means 3 billion dollars increased profit from other divisions (which are all located within the same campus in Redmond BTW) this is different than a company like Sony which branches itself over multiple divisons that don't really talk to each other (because they are separate incorporations, BMG and Vaio are not really the same company, just affiliated). This makes any one division more likely to be squashed even if it is helping the overall public image.

Isn't they actualy still losing about the same amount like they always has? I think someone pointed out MS situation in another thread. Damn I would love to get the man with the charts as picture into this discusion.

Last I read, they're making a small profit on hardware but losing it back on marketing, distribution, etc.