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Earnings: MSFT FYQ3: Home & Ent Rev Up 80-plus Percent On Xbox 360

Just imagine how well Microsoft’s Home & Entertainment division might have done in the first three months of 2006 if the company had been able to meet Xbox 360 demand consistently; without that, the recently created division still increased revenue by more than 80 percent. Overall, Microsoft revenue was up 13 percent to $10.9 billion over the same period last year and operating income rose 17 percent to $3.89 billion. Net income was $2.98 billion, or $29 per share, up from $2.56 billion, or $0.23 per share.
MSN: Revenue was down 3 percent to $561 million, with ad growth of 7 percent dragged down by the expected 31-percent decline in dial-up subs. Growth in display ad rev was fueled by strong growth pn the home page. IM and Hotmail. Search continueds to transition away from Yahoo’s platform to MSN AdCenter. By the end of March, MSN Ad Center was serving more than 70 percent of MSN U.S. traffic — up from 18 percent three months ago — but ad revenues from search were down.
Xbox: — The 360 console is in nearly 30 countries
— Over half of 360 consoles are connected to Xbox Live.
— Xbox Live Marketplace had 10 million downloads of digital content in less than five months; more that 4 million downloads from the Xbox Live arcades since launch.
— Microsoft has opted for higher products costs now to get as many Xbox 360 consoles into the market as possible. allow delivery of as many Xbox 360 consoles as possible. we will experience higher product costs in order “to stretch our lead of installed base in this next generation over Sony.” Earnings release | Webcast (replay) | Transcript