MS cuts 360 estimates, Xbox division posts $289m loss

Microsoft's Entertainment and Devices division has posted a US $289 million (EUR 223.6m) loss for the second quarter - and cut fiscal year estimates for Xbox 360 hardware.

The company now expects to ship a total of 12 million units by the end of June 2007, down from the original estimate of between 13 and 15 million.

"We are just being cautious about the second half," commented Microsoft CFO Chris Liddell to news agency Reuters. "There's a reasonable amount of inventory in the channel."

Despite the US $289 million loss, the Entertainment Devices division was responsible for US $2.63 billion (EUR 2.03) profit during the second quarter.

The Entertainment Devices division not only incorporates the Xbox 360 and software, but also the newly launched Zune media player, PC games, TV platform products, and mobile and embedded devices.

According to Microsoft, repair expenses and the extension of the 360 console warranty from nine months to a year in the US and Canada ate into the division's profitability.

Microsoft posted a revenue increase of US $1 billion (EUR 773m) for the division during the second quarter, with a US $1.3 billion (EUR 1bn) increase for the first half. Revenue for the Xbox and PC game departments grew 76 per cent and 82 per cent, respectively.

Results showed that the company has sold 10.4 million Xbox 360 consoles, as previously revealed by Robbie Bach at this year's CES. The second quarter saw 4.4 million units shipped ended December 31 2006, boosting the first half total to 5.4 million units.

The overall company profit was down to US $2.63 billion (EUR 2.03bn), a drop of 28 per cent, compared to US $3.65 billion (EUR 2.82) in the previous year.