On Thursday, Microsoft released their earnings statement for their third fiscal quarter. Microsoft missed their targeted earnings, and the stock would proceed to tumble nearly 11% on the following trading day. In addition, Microsoft issued a guidance that the final quarter earnings would be much lower than analysts anticipated. The reasoning behind the larger than expected losses: the success of the Xbox 360. Microsoft’s CFO, Chris Liddell, said that because each Xbox 360 sells at a loss, each additional sale increased Microsoft’s cost of revenue. In addition, Microsoft poured significant resources into building additional Xbox 360s in an attempt to meet demand, and this increased their cost of production by a large margin. Year over year, revenues in the Home division, where the Xbox lives, increased by 80 percent, but their losses in the same division nearly tripled. Microsoft anticipates that the effort to unseat Sony in the console wars will cost them more in the future, and that affected their projections for the remainder of the fiscal year.

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