Microsoft Q2: Xbox division revenues down 11%

Microsoft reported revenue of $21.46 billion for the second quarter, up 3% year-on-year, but its Entertainment and Devices Division was not so successful.

Microsoft's Xbox business is part of the Entertainment and Devices Division, which reported an 11% year-on-year decrease in revenues from $4.24 billion to $3.77 billion. Although Xbox isn't the only business stream in the division, Microsoft made it clear the console was to blame.

"Xbox 360 platform revenue decreased $1.1 billion or 29%, due mainly to lower volumes of consoles sold and lower video game revenue, offset in part by higher Xbox LIVE revenue," a statement offered.

5.9 million Xbox 360 consoles shipped during the quarter, down from 8.2 million in the same quarter of FY 2012. Video game revenue was down overall, but Microsoft said it had deferred $380 million in revenue.

That said, the division remained profitable and even improved performance, with operating income of $596 million, up from $517 million in the same quarter a year ago.

Interestingly, Microsoft noted "lower cost of revenue and sales and marketing expenses"; you'll note it hasn't thrown much weight behind Gears of War: Judgment, for example, and has dropped its Xbox marketing spend by 21% or $92 million.

It did, however, make note of "increased research and development expenses" in the Entertainment and Devices Division - up 25% or $98 million. It reads like Microsoft has begun to shift focus from marketing current generation games and hardware to strategising for the next generation.

Overall, Microsoft reported a quarterly profit of $6.38 billion.