MS games division reports 21 percent drop in sales

Microsoft has announced a reduction in losses for its entertainment and devices division, but also a fall in revenues - which the company is attributing to lower Xbox 360 sales, GamesIndustry.biz reports.

During the three months ending March 31 the E&D division made an operating loss of USD 315 million (EUR 232 million), compared to USD 402 million for the same quarter last year. Microsoft said the loss was due to costs related to the launch of media player Zune and expenses incurred by extending the warranty for Xbox 360.

Revenues were down from USD 1.2 billion to USD 929 million (EUR 683 million) - a drop of 21 per cent. According to Microsoft, the fall was due to "decreased Xbox 360 sales".

The company shipped 500,000 consoles during the period versus 1.7 million in Q3 2006, which was the first full quarter the console was on the market. The total number of Xbox 360s now shipped stands at around 11 million.

Sales of Xbox and PC software were also lower, down by 44 per cent to reach USD 393 million (EUR 289 million).

However, the picture is brighter when looking at the first nine months of the financial year for the E&D division. Overall, Xbox 360 console, peripheral and software sales were up, as were sales of Zune - resulting in a 42 per cent year-on-year increase in revenues to USD 4.9 billion (EUR 3.6 billion)

During the same period operating losses fell by 20 per cent to reach USD 693 million (EUR 510 million). Microsoft said this was due to the rise in 360 sales along with improved margins for the console.

The company expects a rise in revenue during the coming financial year, thanks to an increase in sales of Zune and wide availability of Xbox 360 leading to higher console sales.

Overall, Microsoft Corporation posted Q3 revenues of USD 14.4 billion (EUR 10.6 billion) - a year-on-year increase of 32 per cent. Net income stood at USD 4.93 billion (EUR 3.62 billion), while operating income was at USD 6.59 billion (EUR 4.84 billion). The company attributed the results to the releases of Windows Vista and Microsoft Office 2007.