Xbox division limps to 2nd straight profitable year

Microsoft's gaming business loses $130 million in fourth quarter on decreased system sales, but ends $169 million in the black for the 12-month stretch; 11.2 million 360s shipped for the fiscal year.


Last year, Microsoft's entertainment and devices division--the business segment containing the company's Xbox 360 and Zune product lines--posted its first-ever operating profit for a full fiscal year. The division made it two in a row today, but only after a lackluster performance for the fourth quarter, as detailed in Microsoft fiscal year-end earnings report.

Microsoft shipped these out at a rate approaching 1 million per month.
Microsoft shipped these out at a rate approaching 1 million per month.

In the fourth quarter (the three months ended June 30), Microsoft's entertainment and devices division saw revenues of $1.19 billion, down 25 percent year-over-year from $1.59 billion. If there's any consolation there, it's that the segment's losses shrank at the same pace. The gaming business posted operating losses of $130 million for Microsoft's fourth quarter, down from $171 million over the same stretch last year.

For the 12 months ended June 30, entertainment and devices pulled in sales of $7.75 billion, down 6 percent from the prior year's take. While the overall revenue was down marginally, the segment's operating profits took a more significant hit, down 66 percent to $169 million from the previous year's $497 million.

Microsoft blamed both the quarterly and full-year slides on "decreased revenue per Xbox 360 console due to price reductions during the past 12 months, partially offset by increased Xbox 360 console sales and increased Xbox Live revenue." While the company made less per system, it actually shipped out considerably more than in the previous year. Microsoft's fiscal 2008 saw the company move 8.7 million Xbox 360s to stores, while fiscal 2009's total jumped to 11.2 million.

The rest of the company fared similarly, as Microsoft's companywide sales and operating income also shrank. For the fourth quarter, Microsoft posted revenues of $13.01 billion (down 17 percent year-over-year) and operating income of $3.99 billion (down 30 percent). Over the course of the company's entire fiscal year, revenues were down 3 percent to $58.44 billion, while operating profits slipped 9 percent to $20.36 billion.

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

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