I'm with mrstickball here, I feel profitability is here to stay with the Xbox 360. The software sales are just too amazing (even without Halo 3), and I can see them making money on hardware already. Even with a price cut, they'll probably lose a few dollars per unit at most, so it can't hurt their bottom line in any meaningful way.

 

Taking out Halo, the X360, in 3 weeks, has already outsold last year's software cume (in the US) by about 600,000 units. That's about $18m USD right there in extra profit(s).

mrstickball said: The most important thing was: #1. It was their most profitable H&E quarter, ever. With a cash-sink in the Zune, they still profited more than $70m more than the last profitable quarter they had, with Halo 2. #2. They shipped 100% more consoles versus this quarter last year (0.9m vs. 1.8m). This shows they've cleared the warehouse/distribution channels, and are now shipping on-level with demand. From now on, the key is being profitable due to more Halo sales (should double sales in the next 3 months vs. the 1 week Halo 3 launched @), and moving a crapload of profitable Xbox 360s. Thats the key. If they can ship 5-6m consoles this quarter, and make money on each one sold, they should maintain $50-150m of profits for the next 3 months.

Im not sure the Zune is a cash sink. When Microsoft mentioned the Zune as a reason they didn't make money last year, it was in R&D for the device. Now the Zune is out, and even though it isn't tearing up the charts, it's unlikely that it's sold at a loss. It doesn't have loads of software specifically made for it, so Microsoft would have to make sure each Zune is sold at a profit. 

zunes can be bought quite a bit cheaper then they were only a year ago and they have many MANY new models coming out, thus the cost is still probably in the red for zune.

Since MS conveniently moved this years cost of repairing and fixing 360's to last year it's possible the game division will be profitable. If MS hadn't done that it is likely they would have lost money this quarter as well despite Halo 3 (though it would have been a relatively small loss). Unless MS earns around $1 billion this year it means it still doesn't have a structurally profitable gaming division. Given that, it's a bit too early to celebrate.

if you're talking about that 'billion dollars' I hope you realize that is possible FUTURE expenses that get factored as it happens. From what I read anyways.

I did say it was this year's expense moved to last year so I think that would mean I realized it was future expenses. Of course we don't know exactly how much MS spends per year fixing 360's (or even exactly how much the 360 alone makes in revenues and profit/lossses). That's why I said it would have to earn around $1 billion to be structurally profitable for certain. Otherwise it won't be clear whether the 360 would have made money without moving the repair cost to last year.

either way it's a drop in the bucket... 150m in the zune it's a little more than 1% of there actual global net income... nothing alarming, and MS has a global net income going up over the past 5 years.... were most other companies in the software and now hardware industries are going down... MS is doing well it might take longer than expected but a least they are going up THEM, people should start worrying about Sony which has been going down on their net income...
I still don't understand why people keep trying to point the huge deficit MS is doing on the entertainment part when in fact at the end MS is a corp as a whole and generating net profit.... when you have other company sinking almost more money compare to their supposed installed base and are still losing money...
for a company who has just been on that market for 6 or 7 years they are doing fairly well especially taking in account the supposed over powerful concurrence from Nintendo and Sony.... I don't see how investors and shareholder's could be unhappy right now....
as usual I agree with mrstickball on his fact analysis

A little off topic, I think there is new version of Zune is coming out soon? So far they seem to always stick with and support there products.

albionus said: Since MS conveniently moved this years cost of repairing and fixing 360's to last year it's possible the game division will be profitable. If MS hadn't done that it is likely they would have lost money this quarter as well despite Halo 3 (though it would have been a relatively small loss). Unless MS earns around $1 billion this year it means it still doesn't have a structurally profitable gaming division. Given that, it's a bit too early to celebrate.

That $1b RRoD expenditure was moved back to the previous year for tax reasons and to try to get the 360 into the black this fiscal year. It was also the entire expected cost of the RRoD problem, not just this year. MS won't be eating $1b a year to fix the 360s (though they may go over that $1b number down the road and have to dump more into the problem). If MS sold 10m 360s a year, $1b would cover a complete replacement of 1/3rd of those consoles. That's just not realistic. It costs MS far less to repair and refurb a console than it does to build everyone a brand new unit, meaning that $1b number will last them far longer than one year.