The Xbox remains a big money loser for Microsoft, but the company remains open minded about making money on their next generation Xbox 360. They feel that the console market is a highly lucrative one, and are willing to take a loss in the short to medium term in order to make money in the long term. If the new Xbox 360 really was a hit, it could make back losses on the original Xbox inside a few years. But current losses do remain high.
Despite posting a 22% increase in revenue for its Home & Entertainment division Microsoft continues to make an operating loss on the arm amounting to $179 million, bringing the yearly loss to $391 million. This is down from a loss of $1.2 billion last year.