Xbox 360 To Profit Next Year, Says Bach

An anonymous reader writes "Robbie Bach, president of Microsoft's entertainment and devices division, has stated he expects the company's console business to finally break even some time in 2008. After years of losses from the games division, this would be a significant breakthrough for Microsoft's efforts in the games industry. '"Xbox is the hardest piece of consumer electronics hardware to produce in the world, no debate," he said, admitting that "costs are a little higher than we'd like." Microsoft doesn't expect to make a profit on hardware alone, but "we'll probably be gross margin neutral on that over the life cycle of the product, and try to break even on that."'"

Re:So really...

[twistedsymphony]

to be clear MS is already making a profit [techspot.com] on each Xbox 360 console sold, and has been since last November (I'd be willing to bet they're making a killing with the Elite version)... 2008 simply marks the point where the Xbox division as a whole finally gets out of the red, most of that is making up with losses from the Xbox 1 which IIRC never made a profit on a per console basis.

Hardware Repairs

[alvinrod]

I recall reading an article a short while ago that suggested one of the main reasons that they're currently not profitable is because of the extended warrenty that they offered and the number of console replacements that they've had to make. I don't know how prevalent the problem is, but I've heard stories of some people having to send the console in for repair three or more times. I'm not sure how much of this is true, or if it's just Sony or Nintendo fanboys trying to rip on Microsoft.

I do believe that the main problems are faulty DVD drives that result in a scratched disc due to a missing component in some of the drives by a certain manufacturer and either a solder point failing or some component on the motherboard becoming unseated after the board warps slightly due to cooling related issues. I don't know if the Elite solves any of these problems by adjustments to any of the components, but I'd like to think that as they transition to 65 nm chips, they'll solve some of these other issues as well.

I haven't seen any hard figures, but I'd have to say that based on what I've read, the Xbox 360 is running into some of the same problems that the PS2 had, namely cheap hardware that fails early in the products life cycle. The disc drive on my PS2 has recently started to go bad, but I've had it for several years, but if it had happened early on Sony wouldn't have covered it. At least Microsoft is providing some good customer service. I think that everyone could save some money, however, if they'd spend more time designing and testing the product to begin with and not buying the cheapest parts available.

Re:So really...

[Anonymous Coward]

No, that isn't correct. They expect to be making a profit quarter-by-quarter by 2008. No one really knows if the 360 is profitable yet, the article you link to simply points to another article that speculates about a profit. However, we DO know that the division as a whole still posts quarterly losses. This may be overcome by next year, but they won't come anywhere near paying off the $5 billion investment anytime soon.

Re:Disapointing

[Endo13]

Um... I would actually say they're doing pretty good to be making a profit that quick. According to Wikipedia it took Amazon.com [wikipedia.org] about 8 years to become profitable. And this [XBox] was just one branch of a much larger company; MS as a whole has still been quite profitable for their shareholders in the meantime.

And hasn't their X-Box Live been profitable from the start?