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Microsoft: Xbox 360 Sales Slow in Q3

27 Apr, 2007 By: Erik Gruenwedel

Citing lower-than-expected sales of the Xbox 360 video game console, Microsoft Corp. April 27 reported upwards of a 21% decline in third-quarter (ended March 31) revenue to $929 million for its entertainment and devices division.

The sector, which includes the Redmond, Wash.-based technology behemoth's portable Zune music player, reported revenue of almost $1.2 billion during the same period last year.

Colleen Healy, GM of investor relations with Microsoft, said Microsoft sold 500,000 Xbox 360 units in the quarter, and has sold 11 million units since launching the system in November 2005.

CFO Chris Liddell, in an analyst call, said there was “good inventory movement” of Xbox 360 in the quarter.

He said management was working through the budget process of Xbox 360 to determine what expense “cogs” could be taken out of the system.

Xbox Live, the membership-based online gaming service, topped 6 million subscribers, according to company officials.

Liddell said Microsoft expects to generate 1 million total Zune sales by June, since the device's launch last November.

Indeed, Liddell said the entertainment and devices unit is projected to post a 2% decline in revenue in the fourth quarter, ended June 30.

Regardless of the slowdown in entertainment, Microsoft, buoyed by strong sales of its Vista and Office operating systems, posted income of $4.93 billion, compared to $2.98 billion last year.

Total revenue increased 32% to $14.4 billion, compared to $10.9 billion last year.

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