http://www.gamedaily.com/articles/news/xbox-division-doubles-profit-in-q1/

Microsoft is trying its hardest to make sure that the Xbox business stays profitable, and so far so good. Today, although the company as a whole saw revenues and net income decline (14% and 18% respectively) for the first quarter ended September 30, the Entertainment and Devices Division (which houses the Xbox and PC games businesses) experienced a boost in operating income, thanks in part to reduced Xbox production costs.

Net revenues for the quarter were basically flat at $1.89 billion, but operating income jumped 96% from $159 million to $312 million. The non-gaming portion of the division (meaning Zune) dragged business down, Microsoft said. "EDD revenue was flat with growth in Xbox 360 platform and PC game revenue offset by decreased revenue from the non-gaming portion of the business. Xbox 360 platform and PC game revenue increased by $96 million or 8% due mainly to increased revenue from Xbox Live and Xbox 360 video games, offset in part by decreased revenue per console resulting from price reductions during the past 12 months," the company stated in its 10-Q.

Microsoft shipped 2.1 million Xbox 360 consoles during the first quarter of fiscal year 2010, which is slightly down from the 2.2 million Xbox 360s shipped last year at this time. The good news is that Microsoft continues to gain production efficiencies in making the Xbox 360. "EDD operating income increased primarily due to decreased operating expenses. Cost of revenue decreased $103 million or 10%, primarily due to decreased Xbox 360 platform costs, offset in part by increased royalties to partners related to increased Xbox Live transactions," the company noted.

The big story for Microsoft overall right now of course is Windows 7. The software giant seems pleased with the early reception for the new operating system. "The worldwide launches of Windows 7, Exchange Server 2010 and Windows Server 2008 R2 are exciting milestones for Microsoft, our partners, and customers," said Kevin Turner, chief operating officer at Microsoft. "We are pleased by the early positive response we are receiving for these products."

Cost of revenue decreased $103 million or 10%, primarily due to decreased Xbox 360 platform costs, offset in part by increased royalties to partners related to increased Xbox Live transactions," the company noted.

This means that 360 console cost to produce dropped upwards of $50 per console compared to a year ago. $103 million divided by 2.1 million consoles. Yes all of it isnt Xbox but primarily it is.

Could be more than that because we do not know how much royalties they had to pay out.

From that report, it looks like Win XP is hitting MS (killing Vista's hopes) (*) harder than Nintendo or Sony or Apple or IBM or Google or Nokia or Oracle could even dream to.

(*) and possibly damaging Win 7 too, as it forced MS to rush it, so it could have troubles smaller but similar to Vista's ones.

These are terrible results. Obviously they aren't making enough profit from having an evil empire and all that.

Windows 7's release may have been brought forward to combat lagging Vista sales, but its in no way a rushed product. Its amazing how stable its been since even the beta releases. Most of the architecture changes were made in Vista which means the developers have had enough time to get the drivers and applications compatible. One of the biggest changes was applications needing to run as Administrator to even function.

Given there are still many Windows XP computers sold (mostly to enterprise) they are still making pretty decent money on those sales. They are only getting affected by the drop in the computer sales market as people wait for Windows 7. However given they have already taken almost $2 billion in sales from Windows 7 and deferred it til Q2, I'd hardly say it was affecting them that much. If you include those numbers their sales would be almost exactly the same as in 2008.

Well its good to see at least some company's aren't operating in the red.  Does this mean the economy might be on an upward turn?

The "rushing" part wasn't about stability, but about the fact that being a refinement of Vista, it could have its reputation stained if it doesn't look different enough from it, and also to the fact that the initial sensation of lightness, compared to Vista, felt by users in the first betas, was somehow scaled down little by little as MS added features and all the corrections, tweaks and fixes necessary to the final release, or at least this was the impression of many users with low-end PC's. Also, MS shot itself in the foot with its greedy policies that enforced on netbooks to slow XP desperately trying to push Vista on them, but only obtaining to give Linux 30% of that market segment (and it could have dropped even less from its initial near monopoly, had HW manufacturers chosen less crappy distros for most of the first models).

Thats good news. It finally seems that the econonomy is beginning to pick itself back up. Plus Windows 7 income was not counted either. Im expecting a much larger revenues next quarter

No... your fears are without warrant... I've been using the OS since June and right now with all the patches I have the latest build... there is probably next to no diffrence with what I have and what you get with a new PC and I will tell you even upgrading a bloated HP Vista it runs nearly 2x as fast... this allows me to jump the settings in my games up... sometimes two or three levels higher.