Microsoft: Q4 Losses and Profits

Dennis Faas's picture

Even with massive revenues through a number of initiatives, the cost of meeting demand for the Xbox 360 console has left the Microsoft Home and Entertainment division with a posted operating loss of $414 million for Quarter 4, 2006.

Similar losses were felt last year in anticipation of the 360 launch, but despite promises that a number of concepts would force a profit, such explosive revenue has yet to materialize.

Luckily for Microsoft, its SQL server (the language used to retrieve and manipulate database materials) has exploded in recent months, making up for the growing pains of raising any young video game system. (Source:

The costs associated with launching a new console are not unique to the Xbox 360. Microsoft's original Xbox was sold to consumers for far less than the actual cost of production, and many of Sony's competing wares have undergone similar treatment.

The surprise in the Q4 Microsoft report is clearly the success of its SQL. Many insiders argue that the server is now more popular than Office and certainly Windows, and the rumours are reflected in numbers. Combined with the Windows server, SQL initiated an 18% revenue hike, raising Microsoft's Server and Tools division to an income of an awe-inspiring $3.18 billion. (Source:

As for the 360, Microsoft is clearly not too worried. Last week the company announced that it had shipped 5 million units of the console, marking the halfway point to its one-year 10 million unit headstart on Sony's Playstation 3.

With software and accessories perpetually acting as the true money-makers for video game designers, Microsoft's chomp out of Sony market share should mean profits in the long run (despite these early frustrations). (Source:

The bottom line? Although the 360 is certainly a gamble for Microsoft, the success of its alternate divisions more than ensures that the company will more than account for such losses.

Just in case you were worried.

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