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Xbox Division Profits Up 96 Percent In Q1, Sales Flat

Microsoft on Friday revealed flat year-on-year sales for its Entertainment and Devices Division, which houses Xbox, but profits up 96% to $312 million, as Xbox 360's installed base grew to "almost 34 million".
Microsoft on Friday revealed flat year-on-year sales for its Entertainment and Devices Division, which houses Xbox, but operating income rose 96 percent to $312 million. EDD revenue for the first fiscal quarter ended September 30 was $1.89 billion, virtually identical to a year ago. The EDD also includes the Zune media player, PC games, online games, and other products. Microsoft attributed the sharp rise in profits to decreased operating expenses, primarily stemming from "decreased Xbox 360 platform costs." A lower headcount in the division compared to a year ago also contributed to the higher profits. Microsoft said that it shipped 2.1 million Xbox 360s during the quarter, down slightly from the year-ago quarter, when the company shipped 2.2 million hardware units. Growth in Xbox 360 platform and PC game revenue was offset by lower sales of PC hardware products, Zune devices and services, and embedded device platforms. Foreign exchange rates also impacted revenue comparisons. During Microsoft's earnings call, investor relations general manager Bill Koefoed said console revenues were hit by hardware price cuts and year-on-year volume decrease, but he said "overall gaming revenue was up almost $100 million," according to a transcript of the call from Seeking Alpha. He added, "Halo 3: ODST was the number one selling console title in the U.S. last month, along with five other Xbox 360 games in the top ten." The worldwide Xbox 360 installed base is "almost 34 million consoles," Koefoed said, adding that it leads the industry with an 8.7 software title attach rate. Xbox Live revenue growth grew "in excess" of 50 percent, he said. Across all of its divisions, Microsoft, which just launched Windows 7 during the second fiscal quarter, reported revenue of $12.92 billion for the period, a 14 percent year-on-year decrease. Operating income for the quarter was $4.48 billion, while net income stood at $3.57 billion. Microsoft shares were up 5.5 percent to $28.07 in afternoon trading.

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