Microsoft's Xbox arm posts rare profit

Halo 3 spurs 360 sales, helps push entertainment and devices division to $165 million operating profit for fiscal first quarter.

Last July, Microsoft entertainment and devices division president Robbie Bach said the software giant's Xbox 360 segment would post a profit for the first time in the company's 2008 fiscal year. Microsoft reported its first-quarter results for the fiscal year today, and the blockbuster success of Halo 3 has already realized Bach's prediction.

Launched with mere days remaining in the first fiscal quarter (which ended September 30), Halo 3 raked in more than $300 million worldwide in its opening week, and $170 million within 24 hours of going on sale in the US alone. That helped push the Xbox 360 division's revenues for the quarter to $1.93 billion, about 91 percent more than it brought in during last year's first fiscal quarter.

Halo 3 also reversed the entertainment and devices division's money-losing trend, helping it turn the previous first quarter's $142 million operating loss into an operating profit of $165 million. Microsoft also benefited from not having its bottom line gutted by over $1 billion in charges stemming from the 360's now-notoriously high hardware failure rate, as was the case last quarter.

The rest of Microsoft also had a banner quarter, with the company as a whole experiencing its biggest first-quarter revenue growth since 1999. For the three-month stretch, Microsoft brought in revenues of $13.76 billion, up 27 percent year-over-year. Of that money, $4.29 billion was recorded as net income, a 23 percent leap over the previous first quarter.

For those following the next-generation console race, today also saw Sony and Nintendo post their latest financial results.

[CLARIFICATION]: The quarter ended September 30 was the entertainment and devices division's first profitable three-month stretch. However, the previous division to house the Xbox operation, the home and entertainment division, managed to turn a profit for the last quarter of calendar 2004, thanks in large part to the release of Halo 2.

340 Comments

  • Soilfusion

    Posted Nov 7, 2007 2:12 pm PT

    The good thing is that Microsoft are a large enough company to hemorrhage money on repairs that xbox survived for the good of the gaming community. If it had died I think there would be a giant void in the community right now. Playstation 3 just isn't cutting the mustard at the moment.

  • Illidan311

    Posted Nov 1, 2007 4:09 am PT

    xbox > watchstation3

  • MichaeltheCM

    Posted Nov 1, 2007 12:22 am PT

    no way. they're actually making a profit now?! incredible

  • ao_bomber

    Posted Oct 30, 2007 8:58 pm PT

    If MS cared to make their systems more durable, I'd wager they'd get a bit more sales than they are now. All this talk about people complaining about their 360's melting or ruining their CDs is deterring me from wanting to fling 400 bucks at them.

  • jaredrichards3

    Posted Oct 30, 2007 7:43 pm PT

    The xbox still trying to survive on halo

  • evanparker2134

    Posted Oct 30, 2007 3:57 pm PT

    Word.

  • bobbo888

    Posted Oct 30, 2007 2:20 pm PT

    Well of course ps3 has outsold 360 in the past two weeks... NOBODY HAS ONE. Everyone has a 360 because the game variety. The only thing ps3 has going for it is the final fantasy franchise and some other games. I'm not really a video game nerd so I'm not going to go look up on your website. I could care less about the numbers. All I do know is that 360 has waaaaay better games than the ps3 does.

  • darkride66

    Posted Oct 30, 2007 9:10 am PT

    From TheKey: "A question forDarkride66. If PS3 is so great WHY DO you stay on 360 forums so much?"
    I like my 360 too. Great exclusives.

    "And also do you know that that PS3 isn't even close to selling 10.4 million PS3's in its first year of life? Do you also realize that P33 has had 3 price drops in less than a year?"
    Yes, I do realize that. That's why Sony has posted a bigger than expected loss this year for their gaming division. As for your sales numbers, check out vgchartz.com or just google "PS3 on par with 360."

    "And I very much would count out the PS3 this holiday season. Why? Because other than Uncharted Drakes Fortune, the PS3 has nothing under it's belt but Blu-ray movie releases."
    Partly. Also because of the new SKU and most recent price drop. Since this last price drop two weeks ago the PS3 has outsold the 360 worldwide. I expect this to continue over the holiday season. To Flame_Co, my purpose for posting is to foster well thought out discussion on the video game industry through reason and actually research. There's too much beaking about issues with no basis in fact or no perspective on the industry as a whole.

  • Flame_Co

    Posted Oct 29, 2007 8:29 pm PT

    Why do people come into these news articcles and argue about stupid crap? Just be happy the gaming industry is making money and be quiet because if games are making money that means more money to make better games. Darkride66 I ask you this, do you come here just to try and get a ruse out of people or do you actually have a purpose posting here?

  • Zerosumgame

    Posted Oct 29, 2007 8:14 pm PT

    I found it is usually true that those who thought they are smart are actually quite stupid in nature. :X

  • capitalthoughts

    Posted Oct 29, 2007 6:37 pm PT

    This is good news for the X360. Microsoft does deserve some respect for holding it's own in a Japanese dominated area. Actually, I respect both the Wii and X360. As for the PS3. I owned a PSone and a PS2. I thought they were great. Yet, no company owns me and I feel insulted when a company pumps out a 600 dollar blue-ray player, slaps a PS3 logo on it and then expects me to buy it because it is Playstation. I'm not stupid sony.

  • raahsnavj

    Posted Oct 29, 2007 2:26 pm PT

    Oh good. It's good to see our little OS monopoly finally turning a profit on something else! Oh, only two quarters in their whole history? right at Halo release? when is Halo 4 coming out... ouch! Hope they can wait *forever* to turn another profit.

  • langer25

    Posted Oct 29, 2007 1:38 pm PT

    go 360!

  • thekey

    Posted Oct 29, 2007 11:25 am PT

    A question forDarkride66. If PS3 is so great WHY DO you stay on 360 forums so much?

    And also do you know that that PS3 isn't even close to selling 10.4 million PS3's in its first year of life? Do you also realize that P33 has had 3 price drops in less than a year?

    And I very much would count out the PS3 this holiday season. Why? Because other than Uncharted Drakes Fortune, the PS3 has nothing under it's belt but Blu-ray movie releases.

  • darkride66

    Posted Oct 29, 2007 8:17 am PT

    SalarianChemist. Nice post, and looks like you did you're homework but your numbers are incorrect. Check out vgchartz.com and it's clear that the PS3 actually reached that 4 million mark in less time than it took the 360 to do the same, however the sales growth's are almost identical since launch. And with the new SKU and price drop, I wouldn't count out the PS3 this Christmas.

  • SalarianChemist

    Posted Oct 29, 2007 6:08 am PT

    darkride66,

    You are very wrong about the sales comparison you make between the Playstation 3 and the Xbox 360 in terms of how they compare to each other during their first year on the market.

    If you compare the Playstation 3 to the Xbox 360 during similar points in thier lives, the Xbox 360 had sold a significantly greater number of systems to consumers.

    At the 2006 E3, Microsoft announced that they achieved their goal of selling 4.5 - 5.5 million systems...the Xbox 360 had sold over 5 million systems during its first six months on the market.

    The Playstation 3 had only sold 3 million systems at the 6-month point in time...that is significantly less than the Xbox 360 at similar points in their lives.

    Compare sales...what took Sony 11 months to do with the Playstation 3, Microsoft achieved in only 6 months with the Xbox 360.

    And last Christmas, during the Xbox 360's second Holiday season, the Xbox 360 sold more systems than the combined sales of the Wii and the Playstation 3!!!

    Obviously, the Playstation 3 is not going to come close to selling that many systems this Christmas, during its second Holiday season.

    There is absolutely no doubt that the Xbox 360 has sold far more systems and enjoyed much more success than the Playstation 3, both now, and at similar points in their lives.

  • darkride66

    Posted Oct 29, 2007 5:29 am PT

    Skyriderlink. I know people keep bringing this up but it needs to be addressed. Yes, the 360 has more games. It's been out a year longer. That's not rocket science. The PS3 is selling on par with the 360 from launch and will have almost the same amount of games after their first year as the 360 has. By saying the 360 is the winner because of this is like saying the PS3 and the Wii should have never put out a console because right out of the gate the 360 was the winner simply because it was out first. And I don't view XBL as a huge positive factor. If anything it's a liability because you have to pay for it while everyone does the same thing for free. I don't think either console will fail, but a little perspective is badly needed in this debate.

  • Skyriderlink

    Posted Oct 29, 2007 1:48 am PT

    just look at the game libraries and you will see xbox 360 is he winner.PS 3 gamers can't play games with their PC friends.Admit it.More and more great games are coming for 360.xbox has something PS 3 can't offer.It is xbox live combined with window live.I am not saying PS3 will fall i am just saying 360 cannot and will not fall.

  • UnstopppableSol

    Posted Oct 28, 2007 8:05 pm PT

    Considering 360s are always failing, i wouldnt wanna pay full price for one. But right here, at this site, u can get one for completely an offer. My friend got one and all u gotta do is one of the offers, the stamp offer is the best one, juss cancel it within 4 weeks. Its only like $15 so just think of it as $15 for an Xbox360, and to top it off, its the 360 elite, so more bang for that $15.
    http://www.360Elite4free.com/index.php?ref=4275080

  • darkride66

    Posted Oct 28, 2007 6:00 pm PT

    Rentago. Only an annoyance? If you think a 30% failure rate is just annoyance to people, think again. If it weren't for Halo and Bioshock my 360 would have become a projectile this year. I can squeeze maybe 3-4 hours a week to play and my time is valuable to me. It's more than just an annoyance. And extended warranty? You pay $600 (cdn) for a system at launch you don't just assume it's going to die in 6 months, then in another six months, then in 3 months, then start scratching the hell outta your games. It was the second breakdown that I bought the extended warranty, but I still was without my 360 for months in total. Screw extended warranties. Do what I did. Buy a PS3 and only use the 360 for their exclusives.

  • daleerin24

    Posted Oct 28, 2007 4:19 pm PT

    Well LONG LIVE the 360! I myself prefer to have my consoles manufactured by multi-billion dollar conglomerates. (keeps them from flopping like the Dreamcast lol.) Although, I am a little dissapointed with the number of times my 360 broke. (First day I owned it lol) Still I love the backing and integration of the system.

  • pencilpusher69

    Posted Oct 28, 2007 1:32 pm PT

    It just proves, once again, that if there were no Halo the Xbox would do about as well as the N-Gage.

  • Rentago

    Posted Oct 28, 2007 11:05 am PT

    Eh I dono what you guys complain about, its only an annoyance.

    I am on my 2nd 360 and well I got a warrenty like any smart person would have.

    10 year warrenty...

    SO if it breaks and grab a new one and nothing halts my gaming life.

    Of course the elite seems to be the best to get of all of them, I consider it to be the only console you can tell IS new and updated with problems fixed.

    Hell it is doing way better than my first console :p

  • darkride66

    Posted Oct 28, 2007 7:56 am PT

    OnlyTbone. You don't have to be a Sony Fanboy to have your 360 die on you. It's nice that you and you're friends haven't had any problems, and you're in the majority but that doesn't mean reports of 360's failing are exaggerated. I'm on my 4th 360 console, 2 already this year. I'm 33 years old, have always had them well ventilated and probably only have time to play maybe 4 hours a week or so. Sitting in front of your entertainment console with your shiny new copy of Halo3 and staring at the space your 360 should occupy is no fun. I've been without a 360 almost 5 months since I bought mine at launch. I hope this last console they sent me is finally one of the "good" ones but I've stopped taking that chance. Any game that's mulitconsole I buy on my PS3 now. I understand there are may be some graphical differences but I've never seen a review downgrade (or upgrade) their review score because of the differences. That says to be their too minor to be important and so far I haven't been disappointed yet.

  • vahid_xbox_360

    Posted Oct 28, 2007 6:47 am PT

    the 360 is the winner

  • OnlyTbone

    Posted Oct 27, 2007 11:58 pm PT

    I wonder how many sony fanboys get on here and type about their 360 dying. I find it hard to believe that someones xbox broke the first time they turned it on. If that happened its the consumers fault for being so rough with it on the way home or something. Half of this crap is made up. Me and most of my friends have 360s and none of them have broken except for one, but thats only because it was in his SUV and he was sleeping so we went and rocked his vehicle to wake him up and his 360 fell off the dash and smashed on the floorboard. he went into a RAGE..... i still remember the screaming.....

  • is0lati0n

    Posted Oct 27, 2007 7:00 pm PT

    Wtf Autolycus. Keep dreaming that the PS3 will fall. You know it's never gonna happen. Retard

  • mooseman721

    Posted Oct 27, 2007 11:09 am PT

    Autolycus

    What experience are you drawing your conclusions from?

  • laitheybaby

    Posted Oct 27, 2007 9:05 am PT

    What the hell happened to all the twelve year olds in Halo?!? I have been playing Halo 3 online every day since launch and have only come across one or two whipper snappers, they have been replaced by fellow Englishmen and fiery Scots. Online is soooooo much better than Halo 2, especially with the file sharing, and has now replaced Counterstrike Source as my favourite multiplayer game of all time.

  • Autolycus

    Posted Oct 27, 2007 8:13 am PT

    no company will OWN, because both wii and the 360 have something to offer that the other doesnt. however, one will fall. And more then likely it will be the ps3. You'll see the ps4 come out extremely early and guess what, it will still be impossible to maek games for it. Oh, btw. The processor in the Wii and the 360 are still not close to being tapped to their full potential. The ps3, however has a IN ORDER cell processor, meaning that a) they dont have to make direct hardware calls to individual processors (which is nice) and b) The 360 and Wii arent even closed to being tapped into yet and 3) ps3 is still extremely difficult to program for because memory access is shared w/ teh video card and still a complete joke.

  • Agermemnon

    Posted Oct 27, 2007 7:11 am PT

    Good on em i say and about time , i have been very happy with gaming on the 360 and have a heap of games for it so they deserve it .

  • dorohala

    Posted Oct 27, 2007 6:12 am PT

    You should wait and see when MGS4 comes on PS3 then it will boost sales up!

  • lamprey263

    Posted Oct 27, 2007 2:54 am PT

    @Ek-Andy - it's the end of the third quarter, maybe they're assessing their successes

  • Ek-Andy

    Posted Oct 26, 2007 6:08 pm PT

    Its funny how the news headlines are all about profits for each console. Whats the event anyway?

  • MasterChief725

    Posted Oct 26, 2007 5:43 pm PT

    OHHH yeah! it is good to see halo 3 pushing Microsoft to victory! Go master chief!

  • veneno_3210

    Posted Oct 26, 2007 5:22 pm PT

    you have to understand that last time Microsoft completely gave up on the xbox to focus on the 360 that is what brought them back to red this time is different because the 360 is just entering its prime when the original box only had halo 2 in its prime while the 360 has many more.

  • THE_WHITE_MAGE

    Posted Oct 26, 2007 4:19 pm PT

    If you read the clarification at the end of the article they make a very good point. At the end of 2004 Microsoft also had a profitable quarter, all due to Halo 2's release. But after that they went back to losing money again. So in a nutshell, why should it be any different this time? I am not seeing this profit really helping Microsoft in the long run. In another three months we will see....

  • SonyRulzU

    Posted Oct 26, 2007 3:46 pm PT

    yeah until they get the repair bill.lol

  • bookgeek posted Oct 26, 2007 1:38 pm PT (does not meet display criteria. login to show)

    bookgeek

    Posted Oct 26, 2007 1:38 pm PT (hide)

    well atlest because of all that money microsoft is gonna do something about the rrod...i guess,i hope...d@mn it i bet they won't even waste a cent for their customers!!!

  • m4x1

    Posted Oct 26, 2007 12:38 pm PT

    flyingdutchdog -----
    I probably didn't make myself clear, sorry. I was quoting somebody, and my post was not negative towards the 360.

  • darkride66

    Posted Oct 26, 2007 12:33 pm PT

    Jebril. I'm burning time. It's Friday. Get off my back!
    And I don't have anything against MS. I love my 360. In fact, a few posts of mine down (slow day, off my back!) I say exactly that. It's nice to see MS's games division making profit. Good for the industry as a whole.

  • martin_f

    Posted Oct 26, 2007 12:31 pm PT

    Microsoft make money, Nintendo make money SONY lose money LOL!!

  • darkride66 posted Oct 26, 2007 12:28 pm PT (does not meet display criteria. login to show)

    darkride66

    Posted Oct 26, 2007 12:28 pm PT (hide)

    I like to ask them if their Mommies know they're playing a Mature rated games. It makes me feel like a big man.

  • Jebril

    Posted Oct 26, 2007 12:27 pm PT

    darkride do you ever stop posting comments? Do you sit by your computer waiting for people to post support for M$ only to shut them down? If you were a gamer you'd be happy for a gaming division regardless of whether or not you own their console, if Sony made money off the PS3 I know I wouldn't post bullshot about them afterwards, such as "Well they lost money on the PS3 ever since the released it they'll have to do 40X this amount" or BS like that. =]

    Thanks for reading....

  • l337fool

    Posted Oct 26, 2007 12:24 pm PT

    @darkride66 If my 360 broke 3 times I would probably explode so I feel ya. The 12 year olds it pretty much a Halo thing. Thats why I like chromehounds so much older more mature people playing that game.

  • darkride66

    Posted Oct 26, 2007 12:11 pm PT

    l337fool. When I mentioned that Sony had 50 games rated good-excellent, Lair was not one of those. Have a look at the reviews if you'd like a list. I won't waste your time by printing one here. Of the games that are on both systems some look better on the 360, some don't. In no case have I seen a review that scored a PS3 game less (or more) based on these differences. That tells me that ultimately it does not affect the gameplay. I buy all my multiconsole titles on the PS3 because the 360 has proven itself unreliable to me. As for XBL having a better community. I really don't like having to mute at least 2 idiots every single time I play Halo3 online. I enjoy playing it, but I've almost never had to do this with Warhawk. It's like racist, homophobic 12 year olds everywhere just flock to Xbox Live. I like the games but find this frustrating. (Halo 2 was bad for this as well). I don't think RROD is a punishment from the games gods. It's a test. Anyone with less faith would have abandoned the 360 after 2-3 consoles. Not me! My faith is strong! And lo, the Gods rewarded me for my persistance with Bioshock! MS be praised!

  • MrSickVisionz

    Posted Oct 26, 2007 12:08 pm PT

    That billion dollar for faulty gear is going to be spread over a 3 year period ($333M per year) when it comes to reporting it on financial documents income. Halo selling $300M and the face that 360s are being sold for above cost makes this believable, although I don' t think most of us were thinking that deep about it.

  • keglervs

    Posted Oct 26, 2007 12:07 pm PT

    bluntiss: I agree, for the past few months if you own a PS3 and 360 there was very little reason to play it. Maybe Heavenly Sword but I've wore myself out on the hack 'n' slash games for a while. Things should finally be getting better for the PS3 over the next few months. Ratchet looks good & Uncharted looks promising but it is still not enough for a holiday line up. Hopefully next year we'll see more games released for the PS3. People don't dislike Sony. People dislike having a $600 machine and having to wait for quality titles to play on it. It's Sony's fault for hyping the PS3 as the greatest thing since sliced bread and then under delivering on that hype. Once they meet those expectations people will be happy and the bashing will end. But to say the PS3 has a quality catalog of games is a complete fallacy.

    1337fool:

    I agree. Had my 360 since launch and not a single problem. It's strange, I have about a dozen friends who also own a 360 and no RROD for any of them either. Most of them were purchased post launch but with the way people make things sound, at least one of us should have experienced it by now.

  • omegakie

    Posted Oct 26, 2007 11:49 am PT

    It was obvious halo 3 would make a lot of money i mean if the original xbox didn't have halo microsoft would have sold a lot less consoles

  • l337fool

    Posted Oct 26, 2007 11:48 am PT

    I think the RROD is God's way of judging the false gamers.... Never had a problem with my 360. Maybe I am lucky or perhaps there is something wrong with you people.

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