The reports of Microsoft's losses are total losses for the ENTIRE DIVISION. Those do not say that the 360 is still being sold at a loss. There is a big difference, as that division covers just every piece of hardware Microsoft makes, not just the Xbox.

Although the first Xbox lost a lot of money, that was largely due to bad contracts with other manufacturers that ensured every Xbox would be sold at a loss, even with increased volume. Microsoft made sure to get better contracts this time.

This may not be official word, but iSuppi's report of PS3 manufacturing costs also mentions the Premium 360 now costs just $325 to make. That doesn't cover cords and controllers, but if they had a similar volmume drop, then the 360 has a small, but definite profit now.

All this talk of a price cut from Sony is probably hurting their sales right now. People are not going to spend the cash if they think they can save 100 bucks by waiting till the fall. I usually wait to buy my PC games 6 months after they come out. You get it at half price and the game is still very current. I personally am waiting for the PS3 to drop around 100 bucks. That'll tell me it's time to buy! :)

All of those PS3s sitting in warehouses are NOT money already spent. Those things have to be inventoried and taken into account whenever Sony releases a fiscal report. It's the same thing with every business.

At the beginning of a period, you have to count your beginning inventory and it is listed as an asset. Since they are listed as an asset, it's NOT money already spent. All those consoles were inventoried at either their $800+ cost or their $600 sell through worth.

Either way, if Sony drops the price, then they have to take a loss on that amount on each console and it will make their beginning inventory inflated, which means that it won't actually be as high as they think.

If they have 2 Million consoles sitting in warehouses, and they drop the price by $100, then that's a $200,000,000 hit that their profits are gonna take all at once that they cannot possibly recoup.

 They cannot possibly recoup? The PS2 sold at about $100 loss the first year or so. That was around five times that many systems, and they still made that money back.

 You are obviously forgetting how important software sales come into this. More systems usually means more sales. Of course the PSP is an exception (and Xbox doesn't count here, since Sony didn't sign bad pricing contracts with their proccessor providers), but the point is you wrote "cannot possibly" which isn't true. It is possible to recoup costs by increased profit later on.

Sure they recoup it later on down the line in a few years maybe IF the ps3 starts selling, but what I was talking about is the fact that a $100 price cut will mean another loss of $200,000,000 that will hit them all at once in whatever period they decide to make a cut in because they'll have to reduce the value of their inventory. Less value on current inventory means lower profit margins, and theirs is already too low. A loss that size all at once is surely to make alot of investors angry.

 Surely doesn't mean it will. For one thing, their stock went up after the fiscal report was announced, despite the losses from the PS3, so it isn't a guaranteed problem if they cut the price.

Sony already cut the PS3 price by $200.

They originally wanted to launch it at $800.

 Most likely they were inventoried at 800$ which would mean that they are sitting at either 400,000,000$ in the hole or possibly 600,000,000$ if they drop the price by 100$.  Also, warehouse's and shut down production lines still cost money.  If sony isn't stockpiling more PS3's.  Then they are losing even more money on the shut down lines as they'd still be obligated to pay out a percentage of their contract with the manufacturer.  Someone recently said (from Sony) that if they dropped the PS3 price by 88$, they'd lose 900,000,000$.  

Surely the PS3's are not inventoried at either $800 or $600!

I mean, the $600 retailprice also includes the cost of distribution and the margin of the retailer. Now, that either means iSupply is right and Sony was taking an even greater hit or that the iSupply numbers where/are suspect to begin with.

I'm thinking that the cost to procude a PS3 (or an Xbox 360 or Wii) is being overstated by analysts. A 15-30% margin on electronics (for the store selling it to the consumer) is not odd at all, meaning Sony would only get about $419-$510 per PS3 from their retailers to begin with. And that still doesn't add in the distribution and warehouse costs.

Or are people seriously suggesting the stores selling the PS3 do so at break even or a loss?