Microsoft makes $357M profit on games

Gaming division has happy holidays, generating more than $3 billion in revenues from October to December.


Halo 3

Last October, Microsoft's entertainment and devices division, the segment of the software giant that includes the Xbox 360 business, posted its first quarterly operating profit. Based on the strength of Halo 3, the division managed to finish the July-September quarter $165 million in the black.

Microsoft's Xbox business proved it isn't a one-hit wonder today when the company released its latest financial results, which saw the division more than double the previous quarter's operating profit. For the company's second fiscal quarter (the three months ended December 31), the entertainment and devices division posted $357 million in operating income on revenues of $3.06 billion.

In a conference call with investors, Microsoft senior vice president and CFO Chris Liddell said the console had reached a record tie ratio of seven games for every system sold, with the gaming division's revenues beating the company's previous investor guidance by $90 million. Although the revenue growth was minor (about 3 percent) over the same period the year before, the company's gaming business had turned an operating loss of $302 million over the 2006 holiday quarter.

For the first half of the fiscal year, the entertainment and devices division's revenues have been up more than 25 percent. For the full year, Microsoft said it expects the segment's revenues to increase 21-24 percent.

The company did not release specific earnings for the Xbox 360 today. However, it did revisit its 2008 Consumer Electronics Show keynote address. In that presentation, Microsoft execs trumpeted the fact that the console generated $3.5 billion in software, hardware, and other revenue from January to November 2007, saying that the total surpasses that of the PlayStation 3 and Wii combined. During today's conference call, Liddell said that for the holiday quarter alone, the total amount spent in the US on Xbox 360 hardware, software, and accessories was twice that of the PS3, and 27 percent more than on the Wii.

The rest of Microsoft's business divisions met or exceeded the company's expectations, and the company brought in total revenues of $16.37 billion, with $6.48 billion in operating income.

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