The Xbox Actually Turns a Profit!

We earlier reported on Microsoft's great fiscal second quarter, but diving into their second quarter 10-Q filing shows something even more stunning: the Xbox turned a profit! Thus falls the one constant in Microsoft's console business: they had not, until now, been profitable.

Last year Microsoft Entertainment and Devices Division (EDD) President Robbie Bach predicted that the Xbox business would be profitable in 2008. Thus far, halfway through the fiscal year, he's right.

According to the 10-Q filing, for the first six months of Microsoft's 2008 fiscal year EDD has recorded operating income of $524 million compared to a loss of $423 million during the same period one year ago. For Q2, EDD saw operating income of $357 million.

To be fair, EDD also has other products besides the Xbox, such as PC games, consumer software and hardware products, the Zune digital music and entertainment platform, Mediaroom, Windows Mobile, Windows Embedded, and Windows Automotive. But the 10-Q is pretty clear:

EDD revenue increased during the three and six months ended December 31, 2007, primarily due to increased Xbox 360 platform sales. During the three months ended December 31, 2007, Xbox platform and PC game revenue increased $115 million or 5% primarily as a result of increased Xbox 360 video game sales, Xbox Live revenue, and Xbox 360 accessory sales, partially offset by decreased Xbox 360 console sales. Xbox platform and PC game revenue increased $1.0 billion or 35% during the six months ended December 31, 2007, as a result of increased Xbox 360 console sales, video game sales led by Halo 3, Xbox Live revenues, and Xbox 360 accessory sales.

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.

So, second quarter console sales dropped slightly, but that mention of Halo 3 is telling, because you can bet that added a bunch to the bottom line. Since there are other products in the division, we you can't be absolutely sure that the Xbox turned a profit, but Microsoft's statement seems to indicate such.

Microsoft also indicated that for the remainder of fiscal year 2008, they "expect revenue to increase due to increased sales of Xbox 360 consoles and related games, accessories, and services."

Looks like Bach's prediction may hold for the entirety of fiscal year 2008, based on that. Now if only the PS3 could turn a profit, all would be well in the video console world - except for the shortage of Wiis, of course.