Microsoft doesn't exactly lose money. If you add up the parts in the latest gaming platform, the Xbox 360, it doesn't look like this is going to be big money maker.
"While the firm's teardown of the unit gave a peek into the dominance that IBM will have in the next-generation of gaming consoles, it also showed that the bill-of-materials cost for the Xbox 360 Premium reaches $525 USD, 32 percent higher than the $399 USD retail price of the device.
It should be noted that iSuppli's findings do not include the projected cost of manufacturing each unit, so the total cost to Microsoft likely runs even higher.
According to preliminary findings by iSuppli, the custom-built triple-core PowerPC chip from IBM accounts for 20 percent of the materials cost at a price of $106 USD. In fact, the chip and integrated silicon alone account for $340 USD of the total bill-of-materials cost.
However, the most expensive single part in the new Xbox 360 console is the ATI GPU with embedded NEC DRAM, which cost Microsoft an estimated $141 USD."
However, the total picture must be kept in mind. When Gillette sells a razor, they lose money on the handle, and make the profits on the replacement blades. Similarly, Microsoft will make their billions of profits on the games.
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