Halo to Save Xbox?

"We feel like that (Halo) gives us a significant leg up and really will help drive the business."

Microsoft projects the entertainment and devices division, home to the Xbox video game console and loss-making Zune digital music player, to post a profit in the 2008 fiscal year ending in June after last year's $1.9 billion loss.

It expects segment revenue to increase between 10 percent and 19 percent this year from last year's $6.08 billion, 12 percent of Microsoft's total revenue of $51 billion.

WINDOW TO CONSUMERS

Like most console makers, Microsoft loses money on the sales of the Xbox 360 with the goal of making it back and then some over the life of the product with software sales.

It is a business model accepted by investors, but Microsoft introduced an unexpected loss in fiscal 2007 when it took a $1.06 billion charge to fix problems with the Xbox 360.

That loss strengthened the argument made by some investors who think Microsoft should stay out of consumer businesses such as the Zune and Xbox and focus on its profit-rich core software products such as its Windows operating system and Office suite.

Microsoft argues the Xbox and Zune are important in a world where people consume content in new and different ways.

The Xbox 360 is central to Microsoft's strategy of "connected entertainment," a vision of a world where people can consume the media they want any place, any time and on any device.

"The market is not a patient place and it's not very patient with Microsoft in this respect," said Morningstar analyst Toan Tran. "It's going to be an important milestone for the game division to finally turn a profit this year."