360 sales narrow Microsoft game losses

Next-gen console breaks 6 million-unit barrier--but Entertainment and Devices division still takes $96 million Q1 hit.

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First, the good news. As part of its earnings announcement today, Microsoft boasted that high Xbox 360 sales have boosted quarterly revenue for its Entertainment and Devices division by 70 percent. "Demand for Xbox 360 consoles, software, peripherals, and Xbox Live" increased the department's July-September revenue to $1.03 billion, up from $606 million during the same period the year prior.

"The Xbox 360 has sold 6 million consoles worldwide...to date and achieved record cumulative attach rates for software and peripherals in the United States, while Xbox Live passed the 4 million member mark during the quarter," the company said in a statement.

Now, the not-so-good news--just because the 360 is popular doesn't mean it's profitable. For the quarter, the Entertainment and Devices Division lost $96 million, versus the $173 million that it lost during July-September 2005. The Xbox 360 did not launch until November 22, 2005, so it was not on sale during the same quarter last year.

The Xbox 360 is currently the only next-gen console on the market, but it will face competition when Nintendo's Wii and Sony's PlayStation 3 launch next month. It comes in two models: The $299 hard drive-less core unit and the $399 wireless-controller-equipped premium package.

Overall, Microsoft took in $10.81 billion during the July-September quarter, the first of its fiscal year. That was an 11 percent year-on-year increase--the same percentage bump its quarterly operating income enjoyed, going from $4.05 billion during the same period in 2005 to $4.47 billion in this year's July-September quarter. Net quarterly income was $3.48 billion, which came out to $0.35 per share.

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