Microsoft gaming segment posts full-year profits

Entertainment and Devices division ends up $426 million in the black off of more than $8 billion in sales.

Nintendo's Wii may have finally overcome the Xbox 360's one-year head start last week when its US retail sales surpassed those of Microsoft's latest console, but it wasn't all bad news for the software giant. While the gaming world was focused on the E3 Media & Business Summit, Microsoft released its financial results for the fourth quarter and full fiscal year.

Sales and net profits were up for both the quarter and the full year on a company-wide scale. The Entertainment and Devices division that houses the Xbox 360 line also posted positive results, including its first-ever full-year operating profit.

For the 12 months ended June 30, the Xbox division raked in $426 million in operating profits off more than $8.1 billion in sales. That's up 34 percent from about $6.1 billion in revenues the year before, with an operating loss of nearly $2 billion.

Just in the three months ended June 30, revenues for the division were almost $1.6 billion, up 37 percent from nearly $1.2 billion the previous fourth quarter. Entertainment and Devices also posted an operating loss of $188 million, trimmed considerably from more than $1.2 billion in last year's fourth quarter.

Microsoft attributed the full-year spike to increased Xbox 360 sales, and singled out Halo 3, Xbox Live, and accessory sales as specific revenue drivers. The publisher shipped 8.7 million consoles for the full fiscal year, compared with 6.6 million in the previous 12 months. For the fourth fiscal quarter, it shipped out 1.3 million Xbox 360 systems, up from 700,000 for the comparable time period of 2007.

Microsoft's Entertainment and Devices division includes the Xbox 360, Zune, and Windows-based PC gaming, as well as other products like the Surface touch-screen table and Mediaroom Internet TV service.

156 Comments

  • Kravyn81

    Posted Jul 28, 2008 2:21 pm PT

    Wow. With all that dough maybe they can now offer XBL free to their users - and don't bring up that crappy Silver account crap. That's a joke.

  • jozephy117

    Posted Jul 27, 2008 10:16 am PT

    Dude Nintendo will never sell out to Microsoft. They would only do that if sales drop off the charts and i don't see that happening any time soon, do you? Who care how much money there making cause they can dump it into making better games. hopefully

  • lamprey263

    Posted Jul 26, 2008 1:55 pm PT

    this will go to help the near $16 billion in profits they'll already be making this year

  • thenephariouson

    Posted Jul 26, 2008 3:27 am PT

    Not bad stats, after almost 3 years in.

  • godzillavskong

    Posted Jul 25, 2008 7:10 pm PT

    I hear they are going to use the extra cash to go ahead and buy Nintendo.

  • kevdaddy1

    Posted Jul 25, 2008 10:18 am PT

    I like Turtles!

  • jozephy117

    Posted Jul 24, 2008 4:57 pm PT

    BlackKnightOfH8 people order them so when they ship it to the store they intern ship it to the customer right away but there always behind in stock.
    Plus its an advertisement thing they don't ship enough so they can say that and make it sound better than they are

  • darkride66

    Posted Jul 24, 2008 12:30 pm PT

    @ TheArcade. Also, I didn't think you were harsh, just honest. That was a pretty even handed post and I'll accept the criticism that I may sometimes come off as a bit negative, however it does stimulate legitimate debate among gamers from time to time. If everyone always agreed and got along only posting positive news, well what fun would that be?

  • darkride66

    Posted Jul 24, 2008 12:23 pm PT

    TheArcade said "Why is it everytime I see you you always got something negative to say in these "good news for the 360" related topics?"
    My intent isn't to bash the 360, I'm a 360 fan myself. As Yuck_too put it "We just keep things honest from opposite sides of the room."
    I just try add a little realism to all the usual fanboy ballyhoo.
    For example: hotdork70minus1 said "MS isn't in the hole anymore. Some of you need to go over the numbers again."
    Well, really they never have been in the hole, MS easily makes enough to absorb the losses over the years from their games division. But for the purpose of those keeping count, MS most certainly did not erase 3.65 billion lost by their games division since the 360 was introduced by posting one year with a $465 million profit. They didn't suddenly cover their operating expenses with their revenue AND erase 3.65 billion AND have 465 million to spare. Their operating expenses for the last year were exceeded by their revenue by $465 million. The previous years gains or losses aren't factored into these financial reports in any way, shape or form.

  • BlackKnightOfH8

    Posted Jul 24, 2008 11:33 am PT

    I call BS. How the hell is the Wii selling more then the 360 when nobody has them instock? Not a store in a vast majority of my state has even had a Wii since they first launched so I find it highly unlikely it's selling so well.

  • TXMostWanted

    Posted Jul 24, 2008 11:25 am PT

    Finally the 360 has became a profitable business!...However, it's probably because of suckers like me who are on their fourth 360 system due to the 3 Lights...CAN WE FIX IT NOW, PLEEZ!

  • assassinX01 posted Jul 24, 2008 11:17 am PT (does not meet display criteria. login to show)

    assassinX01

    Posted Jul 24, 2008 11:17 am PT (hide)

    Woo! Finally, the Americans learn how to be profitable. Now, 460 million down, only 5.6 billion dollars more to go until Microsoft breaks even for the lifetime of its 'entertainment' department.

  • skirlnik

    Posted Jul 24, 2008 11:10 am PT

    I see the corporate cheerleaders are at it again. Huzzah!

  • TheArcade

    Posted Jul 24, 2008 11:03 am PT

    darkride66

    Why is it everytime I see you you always got something negative to say in these "good news for the 360" related topics? If you've got issues with your X360 then that's too bad but it sounds like a personal problem. This isn't the bash 360 thread "my console failed X amount of times, this isn't enough for them to break even." alright fine we get it but this is a positive report for the 360 no need to rayne on 360 fans parade. If you like the 360 like you claim you do then simply compliment the system then move on. If you have mixed feelings about it and can't help but put it down then it'd probably be best for you to hit the page up or page down button when viewing types of Gamespot news highlights. Save your complaints, right now Microsoft is doing well in their gaming division I think we should focus on that and not be negative. Your 360 hasn't crapped out on you yet has it? Well if it has then you know who to call no need to let us know besides I think most of us have been well informed through the media about how bad the problem was during 360's launch year. Another time another topic.

    Sorry if I sounded too harsh.

  • hotdork70minus1

    Posted Jul 24, 2008 10:57 am PT

    MS isn't in the hole anymore. Some of you need to go over the numbers again. last year was a 2 billion loss, this year has that covered, this years operating costs and the rest of the revenue after that comes to +426 million straight cash. Gears of War 2 and the RRoD out of the way is going to make MS's pockets explode with cash in next years earnings.

  • themyth01

    Posted Jul 24, 2008 10:54 am PT

    MS is here to stay and Halo 3 is a behemoth, over 8 million copies sold.

  • Yuck_Too

    Posted Jul 24, 2008 10:51 am PT

    --grigjd3 --
    We just keep things honest from opposite sides of the room

  • Yuck_Too

    Posted Jul 24, 2008 10:49 am PT

    LOL~

    0.02%

    More made up "facts" today Dark?

    Sony has never admitted any numbers but analysts estimate 1-3% based mostly on store returns.

    Nintendo claims under 1% but to come up with 0.02% would be all but perfect even for them.

    And then you go on to say they learned from previous mistakes...and that's good for them...but you don't give MS the same chance.

    Edit:
    Actually Sony did make the 0.02% failure rate claim...3 months after launch, and has since acknowledged that number has changed.

    How anyone could judge success / failure rates 3-months in is silly to start with but the new 1-3% numbers are currently as accurate as people can estimate.

  • grigjd3

    Posted Jul 24, 2008 10:47 am PT

    You know, I don't think Yuck_Too and darkride are fanboys, but I do think their positions in the "console wars" are pretty clear.

  • darkride66

    Posted Jul 24, 2008 10:39 am PT

    Yuck_Too asked "So does that same kind of result which you claim means MS rushed not also mean Sony should have waited longer?"
    Perhaps. If PS3's start failing en masse I'd say yes, they should have waited longer. However with a failure rate at 0.02% logically I would assume that there are some other quality control practices in place. It's not rocket science. Possible 30% failure rate = something went wrong. 0.02% failure rate = somebody learned from previous mistakes.

  • Yuck_Too

    Posted Jul 24, 2008 10:23 am PT

    --darkride66 --
    Initial chip yields are important but hardly the be all and end all of things. They always start low and get improved.

    For example:
    IBM Vice President of Semiconductor and Technology Services Tom Reeves was quoted in an article on Electronic News last week saying that initial yields for the Cell chip are somewhere between 10 percent to 20 percent. The company thinks it can improve that with logic redundancy techniques, but even 20 percent to 40 percent is still a shockingly low number in the world of high-volume chip manufacturing.

    So does that same kind of result which you claim means MS rushed not also mean Sony should have waited longer?

  • Yuck_Too

    Posted Jul 24, 2008 10:18 am PT

    --Nineball2112 --
    Companies move profits and losses around fiscal years for many reasons. Sony did the exact same thing actually writting of some PS3 losses for the fiscal year prior to the PS3 having actually shipped.

    Not always but typically it's a tax issue.

  • darkride66

    Posted Jul 24, 2008 10:12 am PT

    Lightz39 said "hey darkride, they aren't 2 billion in the hole anymore. That was last years loss."
    Ok. MS games - 2005: -485 million, 2006: -1.2 billion, 2007: -1.969 billion.
    So explain to me how by making $425 mililon for fiscal 2008 gets them out of the hole? I'm still showing the 360 in a deficit of 3.2 billion. Don't get me wrong, I think it's great that MS has turned this around, but they have a lot to make up. They might be able to break even before the 360 is replaced.

  • darkride66

    Posted Jul 24, 2008 10:07 am PT

    @ Yuck_too. Here's an exerpt of an interview with the Microsoft source. I would not make something like this up and resent that you would imply this. "MS was so focused on beating Sony this cycle that the 360 was rushed to market when all indications were that it had serious flaws. The design qual testing was insufficient and incomplete when the product was released to production. The manufacturing test equipment had major gaps in test coverage and wasn't reliable or repeatable. Manufacturing processes at all levels of suppliers were immature and not in control. Initial end to end yields were in the mid 30%. Low yields always indicate serious design and manufacturing defects. Management chose to continue to ship anyways, and keep the lines running while trying to solve problems and bring the yields up. Whenever something failed and there was a question about whether the test result was false, they would remove that test, retest and ship, or see if the unit would boot a game and run briefly and then ship. 360 is too complex of a machine to get away with that."

  • Nineball2112

    Posted Jul 24, 2008 9:54 am PT

    Yuck_Too posted: "Surface touch screen table

    Now for those of you who haven't see it...that thing is really neat and belongs in bars and restaurants everywhere."

    Yeah, it seems really cool. Here's a demonstration of how it works:

    Microsoft Surface

    Also, I have a legitimate question. I have heard that Microsoft took the $2 Billion write-off in the year prior to this most recent fiscal year for $1 billion of existing claims AND $1 billion for future claims. I'm not saying that is wrong of them to do, and actually, I believe it's required if the future claims are more likely than not to occur.

    If that's true, does that change how people perceive MS operating profit for this last year? In other words, they would have had a smaller loss two years ago, and another loss this year if they would have recognize the $1 Billion in each year instead of the $2 Billion all in one year.

    Talk amongst yourselves....

  • Yuck_Too

    Posted Jul 24, 2008 9:40 am PT

    --darkride66 --
    "They were warned by their own managers the 360 wasn't ready from a hardware point and they released it anyway"
    ~~~~
    Well there is a 100% made up and incorrect comment.

    The 2 issues with the 360 failure rate were in a chip MS designed on their own instead of contracting out to save money; and the second was in using a new kind of lead-free solder which is more brittle and has a higher melting point.

    Neither one of which was known about much less acknowledged and much less again warned about by these "MS Managers" as you put it.

  • Lightz39

    Posted Jul 24, 2008 9:37 am PT

    hey darkride, they aren't 2 billion in the hole anymore. That was last years loss. Also the PS3 is far worse off even with the blue ray.

  • darkride66 posted Jul 24, 2008 9:34 am PT (does not meet display criteria. login to show)

    darkride66

    Posted Jul 24, 2008 9:34 am PT (hide)

    gggames said "Every company has thier up and down generation. This is M$ up generation."
    You think this is the up gen for MS? They may not even be able to break even on the console before it's due to be replaced. Not intending to bash MS, but it kind of serves them right. They were warned by their own managers the 360 wasn't ready from a hardware point and they released it anyway, so now they're two billion in the hole. Hopefully they'll learn not to take these kind of risks with their customers for next gen.

  • jtthegame316

    Posted Jul 24, 2008 9:31 am PT

    so they should have amazing profits with a console like the 360 it is the best console i have owned and i have a lot of consoles.

  • Yuck_Too

    Posted Jul 24, 2008 9:29 am PT

    --darkride66 --
    "I would have rather them wait a year, get it right and compete on the strength of the system, not being first to start the race."
    ~~~
    Why just wait 1 year...why not 2 or 3 so things can be that much better again?

    Frankly I think Sony should have waited a few more years instead of losing Billions on bleeding edge technology and hurting the company as a whole with the PS3.

    Then there is the PS2, their shining star...still...even though they had 30 Million suffer the disk read error issue which result in nationwide class-action lawsuits in multiple countries.

    !#$% happens to everyone at some point.

    ~~~~~

    --kevdaddy1 --
    "Yeah but if you combine last years 2 BILLION dollar loss with this years $426 million profit, they are still in the red $1.5+ BILLION dollars (over the time span of two years). Who knows even they really make money on the Xbox,"
    ~~~~
    Well better that then Sony who will have lost over $4 Billion on the PS3 and still won't see any profit until next fiscal year.

    Buying market share only works if you end up with the majority of the market to capitalize on.

  • kevdaddy1

    Posted Jul 24, 2008 9:24 am PT

    Yeah but if you combine last years 2 BILLION dollar loss with this years $426 million profit, they are still in the red $1.5+ BILLION dollars (over the time span of two years). Who knows even they really make money on the Xbox, I know they get paid with software, but how much? Must Be nice to be MS and have ms dos money to throw around. Its all about the Dreamcast!

  • gggames

    Posted Jul 24, 2008 9:17 am PT

    good for M$, it really sickens me how people will turn anything into a console war and tlk about ps3 or the wii. M$ is doing well this generation. Every company has thier up and down generation. This is M$ up generation.

  • audioaxes

    Posted Jul 24, 2008 9:14 am PT

    360 is in much better financial shape that the PS3

  • darkride66

    Posted Jul 24, 2008 9:12 am PT

    okassar said " There are barely any of the refurbished 360's breaking down as they have the heat sync and virtually none of the 360's made in the past year and a half have that problem.MS fixed it,shut up."
    That is really little consolation to myself and the millions of other console owners who didn't receive a good unit, have had repeated problems and continue to game in fear that their 360 is going to die at any moment. It's like saying tuberculosis isn't a problem anymore because cases are way down and there are treatments (that's right, I'm comparing rrod to TB). Doesn't mean 360 fans aren't still having problems. It's great that the new units are more reliable, but that doesn't help me as a 360 fan in the slightest. I'm one of the minority that MS sacrificed in their quest to get to market first. I would have rather them wait a year, get it right and compete on the strength of the system, not being first to start the race.

  • darkride66

    Posted Jul 24, 2008 9:03 am PT

    Yuck_Too said "MS covers replacement units for 3-months from date received."
    That's what one rep had told me previously, but still I had to fight and talk to a manager before they would take back my replacement unit. They said disk scratching was not covered, but luckily I had the extended warranty card yet to play. Halo 3 arrived while I was waiting for new replacement console. That helped mitigate my rage when I did finally receive the replacement console a month later.

  • andrew_ribbons

    Posted Jul 24, 2008 9:01 am PT

    "Yuck_Too MS covers replacement units for 3-months from date received."

    Only in terms of random failures, there's a full year warentee contract with whereever you bought it from, plus a 3 year extended warentee against RRoD failures.

  • andrew_ribbons

    Posted Jul 24, 2008 8:58 am PT

    Glad to see, MS deserve it, their customer support with the 360 is top notch, i even got a free game just because i had to suffer a week or two of dodgy Live connection. I didn't even complain first, they just gave it to me and offered it to everyone, wasn't even a bad game either. Now, we're seeing a completely reinvented 360 interface coming our way, plus a whole flotilla of amazing exclusives like Fable 2, Halo Wars and Gears 2

  • Sins-of-Mosin

    Posted Jul 24, 2008 8:52 am PT

    Picking up even more steam and the exclusives lined up for the rest of the year will just keep it on the top as the #1 gaming console.

    Nintendo can keep the grandparents and the six year olds and the PS3 can stay with the movie crowd.

  • okassar

    Posted Jul 24, 2008 8:37 am PT

    Ya,Ring of Death is old news and the only people who mention it are Sony or Nintendo fanboys.I bought a 360 when it first came out,got Ring of Death,sent my 360 out got it back in 2 weeks,no problem.Now I've had a 360 for a long time and nothing has happened to it at all. There are barely any of the refurbished 360's breaking down as they have the heat sync and virtually none of the 360's made in the past year and a half have that problem.MS fixed it,shut up if you're going to mention that against MS because it's barely happening anymore.Anyway....go MS,I'm not an MS fanboy but for now I'm happy for them because they made such a good system that I use every day and Xbox Live is great and there are still good games I have yet to buy even though new ones are coming out.You don't know how good a 360 is until you get it,you don't know how bad a Wii is until you get it...and the PS3,meh,you expect quality and I guess you end up with Blu-ray player and all that,so that's good---in other words,the Wii fails,360 ownz,PS3 almost ownz but Sony is too lazy to push it a bit further

  • breakitapart

    Posted Jul 24, 2008 8:34 am PT

    MS is looking to do well the next 12 months with some really great titles for the console.

  • Yuck_Too

    Posted Jul 24, 2008 8:32 am PT

    MS covers replacement units for 3-months from date received.

  • rancid36

    Posted Jul 24, 2008 8:32 am PT

    I bought a Xbox 360 because it has the best games, period. This will become even more evident into 2009 and 2010. Profits will only continue to grow.

  • darkride66

    Posted Jul 24, 2008 8:26 am PT

    Beaglesniffer said "you get a 3 year warranty for the 3 red rings which is renewed every time it gets repaired."
    Oh, if this was only true. MS only counts the 3 year warranty from the date of you initial purchase, not from when they replace your console with a refurbed. Those refurb units they send you are still only covered under your initial 3 year warranty. I had an issue when the last 360 they sent me was a disk scratcher. I only had this unit for a month but Microsoft wouldn't take it back because the warranty that covered disk scratching was only 1 year from initial purchase (I bought my 360 at launch so that period was up). So even though I only had this console for a month, and the console it had replaced rrod'd on me they weren't going to repair the refurb unit unless I coughed up $170. Thankfully I had coughed up $75 for MS's extended warranty when console 2 rrod'd on me and I when I pointed this out they reluctantly agreed to exchange my latest faulty console. They exchanged it for a console older than the one it replace, but thankfully that one has held out for the last 9 months.

  • Tremblay343

    Posted Jul 24, 2008 8:26 am PT

    @hotdork70minus1
    The reason why no one reports on RROD is because it's old news and no one cares. It's not like gamespot is going to put up a new article every couple of months "Guess what, old Xboxs are still breaking!". Just because you don't hear about it doesn't mean it's not happening.

    But actually on topic, good for microsoft. They did have a pretty strong fiscal year, and I'm sure sure Halo 3 and GTA4 helped a little

  • the_sorrow_MGS_

    Posted Jul 24, 2008 8:21 am PT

    Im sure that Gears of war 2 will help with their holiday sales. Damn locusts

  • Yuck_Too

    Posted Jul 24, 2008 8:19 am PT

    Surface touch screen table

    Now for those of you who haven't see it...that thing is really neat and belongs in bars and restaurants everywhere.

    http://www.microsoft.com/surface/index.html

  • hotdork70minus1

    Posted Jul 24, 2008 8:06 am PT

    faidon5987 - anyone can say " people I talk to have RRoD " " Everyone I know has RRoD " well guess what ? I'm not seeing actual, credible news reports on RROD anymore and haven't for a while....because it's old news and slowed down.

  • Beaglesniffer

    Posted Jul 24, 2008 7:46 am PT

    @ all of you

    RROD is still happening reason why is because you still have the older chipset and motherboard

    i think all SKU's include a falcon chipset new 100% elites have them.
    they fail a lot less than the zephyr but 1% LOL more like 5-10% but that is a lot less than before

    and after jasper comes out it will solve the main problem of the heat around the GPU we should see 1-3% fail rate which is below the average fail rate of a standard electronic device and will match the fail rate of any other console hopefully

    you get a 3 year warranty for the 3 red rings which is renewed every time it gets repaired

    and a 1 year warranty for everything else aka 1 red 2 red 4 red

    the performance of each console is similar and although 1 maybe slightly better in perfomance its not a big difference and will not affect it in any big way

    now thats every arguement settled!
    talk about the story aka the profit

    capiche?

  • xRownan

    Posted Jul 24, 2008 7:38 am PT

    These numbers make me happy.

  • SteeleInd

    Posted Jul 24, 2008 7:35 am PT

    @faidon5987

    No. RROD is old news. Xbox 360s with the Falcon ship have about a 1% fail rate, and the new Jasper chipset have a less than 1% fail rate. If your friends are still getting RROD, then they have old Xbox 360's with the crap chipset, which means they never got RROD before.

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