Microsoft Turning Xbox 360 Into Success

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After years of losses with its console gaming division, Microsoft is beginning to see the light at the end of the profit tunnel with the Xbox 306, according to an article at The Escapist. The article looks at the companyis latest marquee title, Gears of War, and includes a contrast with Sonyis increasing financial troubles with the PlayStation 3.

The article points out that "when Microsoft launched the 360 last fall, its executive team really didnit know that they would beat Sonyis PlayStation 3 by a year. Now, as Microsoft enters its second holiday season, it has more than 160 games available, while Sony will struggle to get 22 out by yearis end."

While Microsoft lost US$3.7 billion on its first generation Xbox, which included an expensive hard disk, Microsoft has reengineered the Xbox 360 so that it only costs $323 to manufacture. Mr. Takahashi contrasts that to the PS3 which is estimated to cost $840 to build. "Microsoft is in a position to introduce price cuts that could drive Sony deeper into the red." Moreover, Sony is in a poor cash position while Microsoft expects to achieve profitability with the Xbox in June, 2008.

Sony reported a quarterly loss in it September quarter of some $369 million for its gaming division, losses the company attributed to PS3 startup costs. Microsoft reported a loss of some $96 million for its most recent quarter, down from a loss of $173 million, which effectively means that the two companies have traded places in the console market in terms of operations.

The article offers other details about the console market, as well.

[This article has been updated with addition information. - Editor]

Bryan Chaffin contributed to this report.

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