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Microsoft's Xbox 360 division loses $31 million

After consecutive quarters posting a net profit, Microsoft's Entertainment and Devices segment returns to red ink despite 30 percent spike in hardware sales.


Just as the stock market fluctuates constantly in the weak economy, so too do companies find their financial fates wavering. Today Microsoft provided the latest evidence of this, releasing mixed results for its second fiscal quarter.

1.7 million sold from January through March.
1.7 million sold from January through March.

For the three months ended March 31, 2009, the software giant announced that company-wide revenues dipped 6 percent year-over-year to $13.65 billion, while operating income was actually up 3 percent to $4.44 billion.

The news was similarly scattered for Microsoft's Entertainment and Devices division, which includes the Xbox 360 business. Total revenues for the gaming segment were down less than 2 percent to $1.57 billion, and where the division posted an operating profit of $106 million during last year's second quarter, this year it ran a $31 million loss.

On the positive side, Xbox 360 sales picked up considerable momentum. Microsoft's console sold 1.7 million systems during the quarter, up nearly 30 percent from the same period last year. Microsoft also touted improving attach rates of games and accessories for the system, saying the average owner has 8.3 Xbox 360 games and 3.9 accessories, up from 7.5 games and 3.6 accessories at this time in 2008.

In a post-earnings conference call, Microsoft chief financial officer Chris Liddell said that he was pleased with the company's relative performance in what he called the "most difficult economic environment" the company has ever faced. Liddell specifically called out Xbox 360 hardware sales as one of Microsoft's bright spots for the quarter but cautioned investors that the company expects economic recovery to be slow and gradual, lasting at least through the next quarter and possibly the calendar year.

During the call, chief accounting officer Frank Brod also updated investors on the company's Xbox business. For the fiscal year-to-date (since July 1, 2008), Brod said Microsoft had sold 10 million Xbox 360s worldwide, 15 percent more than it managed over its entire previous fiscal year.

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