Yesterday, Microsoft announced robust earnings for its 2006 fiscal year, which ended on June 30. Inside its financial report, the company also revealed the results for its Home and Entertainment division, which manufactures and markets the Xbox 360.
The year-end tally brought both bad and good news on the Xbox 360 front. As is the case with most platform launches, each new console is costing Microsoft money--so much money, that Xbox 360 costs wiped out income from Home and Entertainment's profitable projects. Though the division took in $4.2 billion in fiscal-year revenue and $1.14 billion of revenue during its most recent quarter, it is still in the red. The department suffered an annual operating loss of $1.26 billion and a quarterly operating loss of $414 million.
That said, Microsoft's lavish spending has bought it some sizable market share. The company also announced yesterday that it shipped 5 million Xbox 360 consoles worldwide, hitting the upper end of its 3-5 million target for the console's first six months on the market. In the last quarter alone, the company overcame persistent hardware shortages and shipped 1.8 million 360s worldwide.
While the Xbox 360 is off to a good start market-penetration-wise, Microsoft plans on expanding the console's installed base even further during the next 12 months. In a conference call with analysts after the earnings announcement, Microsoft chief financial officer Chris Liddell predicted that "by the end of the  fiscal year, we will have sold 13 million to 15 million Xbox 360 consoles since launch." Microsoft's 2007 fiscal year ends on June 30, 2007--just over 18 months after the Xbox 360 went on sale on November 22, 2005.
Will Microsoft make its goal in the face of not one, but two rival next-gen console launches this fall? That remains to be determined, but the console will have the advantage of being cheaper than the Sony PlayStation 3 and having a bigger game library than the Nintendo Wii. The upcoming 12 months will also see several exclusive "system seller" titles be released for the 360, including Epic Games' Gears of War, which is tentatively due this holiday season. Halo 3's nebulous "2007" release date also means it could possibly hit stores by next June, although the previous two Halos were released in November.