The Xbox brand is doing fine, it has come a long way in it's second iteration.  Of course, it would be doing better if the console was better tested before released.  However, the loses from R&D, the first Xbox, etc... are already in the books and accounted for.  It has been turning a profit lately and that is what matters.  It is a huge improvement over the previous few years.  Microsoft knows what it is attempting to do with the Xbox brand, and so far it has made huge strides.  It would be ridiculous to abandon it now after investing that much time and money into it; this is especially true since it is currently turning a profit.

@koffieboon

"Don't forget Microsoft had a huge pricedrop in Europe this year, they must be taking quite some losses on the sales of their consoles here. "

Actually since the Euro is worth way more then the american dollar, every 360 sale in Europe is worth way more in american dollars. MS can afford to drop the prices there since the economy is so bad in America, thus lowering the american dollar value.

Even so.......you just saw that MS posted a profit in the past TWO fiscal quarters......meaning that no, they arent taking heavy losses, quite the contrary.

So the Xbox 360 sales increased by 1.7M and the cost of revenue increased by between $69-139M. So if those consoles were on a different account, it would have cost them between $40 and $81 per console. Of course the closer figure would be $60 and this is entirely unrealistic. But what it does show is that the Xbox 360 cost reductions YOY must have been significant to achieve such an increase in sales with such a small increase in operating expenses.

Well on topic, its good to see MS posting a consistent profit. They have come a long way. And im sure their happy to hear that Sony is still posting quarterly losses with the playstation division.

Nice notice.

their will be another xbox system, but i think they will stop making the zune player this year, and save money that way for their 2010 report.

The division is posting $150M profits quarter after quarter, and that will only grow.

Actually, Microsoft provided all the information we need to assess the cost reduction from last year:

"EDD operating income decreased primarily due to increased research and development expenses,
partially offset by decreased cost of revenue. Research and development expenses increased $251 million or 37%,
primarily reflecting increased headcount-related expenses associated with the Windows Mobile device platform,
driven by recent acquisitions. Cost of revenue decreased $112 million or 4%, primarily driven by
decreased Xbox 360 manufacturing and warranty costs. "
So Microsoft sold 40% more units (from 4.3M to 6.0M) but the costs manufacturing and warrenty costs actually went down by 112M.

So even without knowing Microsoft's initial cost base for the 360, we can see that it dropped by about 30% + $20 per unit sold.

This makes total sense looking at the likely pricing change from last year: From $330 manufacturing+warrenty costs to $215 last quarter.

Overall numbers seem kind of low considering how well the software and hardware is selling. However it is a profit and we are in a recession plus MS was very aggressive with their advertising and promotions. MS must have encouraged the black friday sales because everyone seemed to have 360 bundles. Also if you look at the price difference between the 360 and PS3 in Europe you wonder if MS is actually making money on the Arcades.

I thought 2008 was the best year yet for the xbox. I wonder why revenue only increased by 110 million and profit dropped by 225 million. (Compared to the same quarter last year).