Microsoft suffers losses as Xbox shortages continue

Record revenues marred by component supply issues

Microsoft has posted its revenue results for its second quarter ended 31st December, revealing a loss of USD 293 million from the division which manages its next-generation Xbox 360 console.

Overall revenue for the quarter was posted at a record USD 11.84 billion, an increase of 9 per cent on the same period a year ago. Profit rose 5 per cent from USD 3.64 billion in 2004 to USD 3.65 billion, although the firm admits that the results have been adversely affected by significant losses in its Home and Entertainment division.

The Home and Entertainment division - which includes the Xbox arm of the business - saw revenues of USD1.56 billion and a substantial loss of USD 293 million, compared to USD 1.37 billion revenues and a USD 55 million profit in the same period in 2004. The continued impact of component shortages for its Xbox 360 console have been cited as the main reason for the loss in profits, though MS officials have stated that the manufacturing troubles are now being resolved.

Colleen Healy, a senior director at Microsoft, told CNET News: "Overall revenue did come in slightly below expectations, mostly driven by our home and entertainment unit. We did have some component shortage issues for Xbox 360 that we believe are behind us."

Microsoft stated that sales of its new console, which have been significantly lower than expected due to widespread supply shortages, had reached 1.5 million during the all-important pre-Christmas period. The figure is broken down in terms of territories as follows: 900,000 in North America, 500,000 in Europe, the Middle East and Africa, and 100,000 in Japan.

The company's previous target of selling 3 million consoles in the first 90 days from launch has now been lowered to 2.5 million as a direct result of the component shortages. Microsoft remains confident that a solution to the supply problem can be found, and still expects to sell 4.5 to 5.5 million by June as manufacturing and retail supply continues around the clock.