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Record Xbox 360 Sales, Kinect Success Fuel Microsoft Quarterly Growth
Record Xbox 360 Sales, Kinect Success Fuel Microsoft Quarterly Growth
April 28, 2011 | By Frank Cifaldi

A record number of Xbox 360 console sales -- along with the rapid-selling Kinect -- helped to fuel record revenue results for Microsoft, which saw a 13% increase year-on-year for the first three months of 2011.

Company-wide revenue was reported at $16.43 billion, with the Entertainment & Devices Division -- which includes the Xbox family, the Microsoft Game Studios publishing subsidiary, and the Windows Phone line -- contributing $1.94 billion of that figure, up 60 percent from the $1.21 billion it brought in during the same period one year prior.

In all, 2.7 million Xbox 360 units were sold, up from 1.5 million in the same period last year, representing a new quarterly record for the nearly five and a half-year-old console. The Kinect add-on -- which debuted November 4 -- sold 2.4 million during the quarter, putting it well over 10 million sold life-to-date. Revenue for the entire Xbox 360 platform was up $712 million (69 percent).

In all, the EDD division made a quarterly profit of $225 million, a leap of 50 percent from the previous year.

"We delivered strong financial results despite a mixed PC environment, which demonstrates the strength and breadth of our businesses," said Microsoft CFO Peter Klein. "Consumers are purchasing Office 2010, Xbox and Kinect at tremendous rates, and businesses of all sizes are purchasing Microsoft platforms and applications."

Overall profit for the quarter across the whole company for the tech giant was reported at $5.71 billion, up 10 percent on the same quarter in the previous year. According to Microsoft, its Windows 7 operating system has sold 350 million licenses to date, though revenue for its Windows division declined 4 percent, in line with PC sales trends.

Microsoft's outlook for the next quarter says that the Entertainment & Devices division will see a revenue growth of "roughly 25 percent."

[UPDATED: In a Gamasutra-attendend conference call that took place following the announcement of these results, Stifel Nicolaus analyst Tim Klassell asked Microsoft about the timing for the announcement of its next console, asking "Do you guys internally have a time point on when you have to make that decision?"

In response, Microsoft's Peter Klein said simply that the company is "really not talking about that," and is instead focused on the Xbox 360 and Kinect for the time being.

During the same call, Microsoft also spoke briefly to the success of Xbox Live, saying that the service "saw healthy increases in transactional revenue, which continues to exceed subscription revenue."]

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Leon T
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So MS might actually make a profit off the xbox 360 but will not make up the losses from the xbox. The game industry is pretty warped when the 360 is reported as such a success after taking so long to even break even. Actually they will not really break even since they will be spending money making the next console. Maybe they will write off the R&D cost to a different division to make is look like the Entertainment & Device Devision are in the positive.

MS will need to sell their next console for a profit from day one if they ever want to make up the losses from the first xbox. Else they. They might lose the 360 profits just like Sony lost the PS1 and PS2 profits with the PS3.

Lyon Medina
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Excuse me, but what the hell are you talking about? Where is your research in that statement, for that matter where are your details or even sources?

I highly doubt that a business giant like Microsoft would have lossed so much an amount that they are still recooping from launching the X-Box this many years out. And not only that, after loosing the amount (your not detailing the amount thier loss but what you making to sound out like a large amount) would get into a whole new console cycle just to have another few years before they can make into the positive again? That's a stretch even for me.

Leon T
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Why don't you look it up yourself if you really want to know. I didn't make my post to prove anything to you or anyone else. Microsoft lost billions on the Xbox. That is a fact. They lost more on the Xbox360. Anyone that follows the business even a little knows this.

They sell their consoles at a lost. The entire RROD situation cost them billions on to deal with on top of the money they were not making on the sell of the console for years. Again you can look up this information yourself if you want proof. I have an interest on the business side of the gaming industry and I'm not wasting my time proving facts to someone that clearly does not.

Jamie Mann
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Citation needed :) Saying something is a "fact" doesn't necessarily make it true.

Yes, they lost money on the Xbox 360, between subsidising the hardware and the RROD fiasco - but the division made $225 million in profit last quarter. Admittedly, that was on the back of Christmas sales and the Kinect launch, but that's on the back of an additional 2.7 million consumers. So they could still potentially clock up to a billion dollars *profit* per year.

And it's also worth bearing in mind that the hardware subsidies and the RROD write-off were almost certainly tax deductible. Certainly, Microsoft wouldn't have ploughed $1 billion into the Kinect marketing budget if the Xbox 360 was still heavily in the red...

Leon T
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@ Jamie Mann,

Look it up yourself.

If you honestly think that Microsoft wouldn't spend more money on their video game business after losing a ton of money on it, than you honestly don't have clue.

Fábio Bernardon
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"Consumers are purchasing Office 2010, Xbox and Kinect at tremendous rates, and businesses of all sizes are purchasing Microsoft platforms and applications."

My question is: dos Office and Windows are part of the EDD division? Or are they in this sentence just because it was a comment over the overall performance of all divisions?

Simon Carless
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Office and Windows are not part of EDD.

Camilo R
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MS has actually been making a profit on the 360 for years now (since 2008 if I remember correctly). It's funny how MS news always come down to the same argument:

Leon T
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What is funny are people that either don't understand or just don't have a clue how much an investment these companies put into consoles and how long it takes to make that investment back. It takes longer when you sell your console at a lost and even more so when you have spend more than a billion dollars dealing with RROD.

Here is a hint: You can still post a profit for few quarters or more before you actually make up those loses.

If not for RROD the Xbox 360 likely would have turned a profit as a whole by now. That might happen by the end of this year if R&D for the next gen are not too high.

Marcus Miller
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I guess all those avatar accessories that I purchased added to their bottom line...