they made a profit with the Xbox division from september-december 08.

That means if they felt like it, they can drop the prices again. Especially with the cost-cutting Valhalla chipset due this fall.

PS3 however is still selling at a loss.

MS all ready has the price gun aimed at Sony.........Sony is still fumbling the bullets into the chamber lol.

"While Sony’s revenues increased this year, Microsoft’s share ended up decreasing in value likely due to decreased Xbox 360 hardware prices."

While revenues did increase for Sony............they did ultimately post NET LOSSES.
While revenue decreased for MS, they did however post a NET PROFIT.

NET is what matters in the end.

Also, MS's revenue increased 2 percent YoY.

actually, i beleive microsofts total revenue increased even.   just less than they thought it would.

The EDD's revenue was $150 million less than the same quarter last year, while the revenues only increased $110 million in the same quarter. The EDD is expected to receive the bulk of the 5,000 job cuts. It appears that the gaming segment within the EDD has already been impacted. MS shutdown the gamerscore blog as well as an additional first party studio, Aces. This continues the direction of MS sellling or closing first party developers (Bungie and Ensemble). There are additional rumors of a management restructuring for EDD specifically impacting the Xbox division. I don't know if the Xbox is in trouble, but it is unlikely that it is doing as well as some think it is.

I believe they will cut rendundant services and outfits and make essential studios in-house like Nintendo.  Bungie was too casual for MSFT's tastes and Ensemble, although great, isn't known for making annual killer hits continuously.

With the division at least posting a profit it's even less likely that it's doing as poorly as some people think it is.

Why'd E&D make less profit this Christmas vs. last Christmas?

Halo 3. 'Ya know it *did* ship around 3-4 million copies in the same time period last year vs. MS's 1st party offerings this year that were slightly less than stellar (from a 1st party profit standpoint).

Revenue actually increased for EDD compared to the Halo quarter.

Regarding the Zune, it's revenues decreased, but MS didn't invest in it at all(no advertising, and no hardware refresh for 2008).  It is likely that the Zune made money.

Actually it was mostly because of increased R&D spending in Windows Mobile according to Microsoft:

http://www.vgchartz.com/forum/thread.php?id=58069

If you eliminate this increase in R&D, they actually made more profit than last year. Even more so if you add Zune's lost revenue.

As for the lack of first parties, Microsoft more than makes up for that by buying exclusives from third parties.