Microsoft makes tiny profit on Xbox 360 hardware

Through reduction in manufacturing costs, Microsoft has managed to bring the cost of the Xbox 360 to a zero loss, if not a slight profit. With a reduction in manufacturing costs by nearly 40% since the console's release and perhaps streamlining of the process and bulkier orders, a $399 pricetag now nets Microsoft $75.70 – before the unit has been shipped however. While Microsoft themselves haven't announced whether or not they plan a price drop, this will definitely give them leverage in the console wars if they wish to make the console cheaper.

While they can't beat the Wii on price, they have a huge price advantage over Sony, which may be a key factor in determining supply and customer cost.