Xbox Turns Q2 Profit

Microsoft’s Entertainment and Devices Division is now officially halfway towards a full year of Xbox profitability


The Redmond, Wash.-based Xbox house said Thursday that for the second fiscal quarter ended December 31, the EDD’s operating income reached $357 million, up from a $302 million loss for the same period a year ago.

Operating income within the division increased during the quarter primarily due to increased revenue, decreased cost of revenue and decreased marketing and sales expenses.

Lower manufacturing costs for Xbox 360 hardware drove the cost of revenue down $523 million, or 22 percent during the quarter.

Total revenues for the EDD, which houses Xbox, PC games and Zune, among other businesses, were $3.06 billion, up from $3 billion for the same period a year prior.

Overall, Microsoft posted fiscal Q2 sales of $16.37 billion (up 30 percent year-on-year), operating income of $6.48 billion (up 87 percent) and earnings per share of 50 cents (up 92 percent).

Microsoft attributed EDD’s increased revenue to Xbox 360. Xbox 360 game sales, Xbox Live revenues and Xbox accessory sales partially offset lower Xbox 360 console sales, according to the company.

“We shipped 4.3 million and 6.1 million Xbox 360 consoles in the second quarter and first half of fiscal year 2008, respectively, as compared to 4.4 million and 5.4 million Xbox 360 consoles in the second quarter and first half of fiscal year 2007, respectively,” the firm said. Microsoft said in early January the Xbox 360 had sold 17.7 million units globally, life-to-date.

“…For the remainder of fiscal year 2008,we expect revenue to increase due to increased sales of Xbox 360 consoles and related games, accessories, and services.”

In 2007, Microsoft's EDD posted a Q1 profit of $165 million.

Prior to this fiscal year, Microsoft had pledged that the Xbox division would finally turn a profit for an entire year, a notable change for a division known as a money-loser.