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Computers, Media, Internet, Finance

Microsoft’s Halo Effect


Now Microsoft has a Halo effect, too.

The software behemoth Thursday reported blowout earnings performance with a bright spot: Its entertainment and devices unit posted a profit on a 91 percent jump in revenue. Microsoft’s group even saw an uptick in Xbox 360 sales related to its Halo 3 release, which did $300 million in its first week, giving the software maker something of a Halo effect.

“Xbox 360 sales also received a shot in the arm as customers stocked up in anticipation of the launch of Halo 3 and other upcoming titles,” McAdams Wright Ragen analyst Sid Parakh wrote Friday in a report.

Microsoft sold about 1.8 million Xbox 360s in the quarter.

The so-called halo effect, of course, is most often used in tech circles to describe the effect of Apple’s iPod adoption on Mac sales.

Microsoft reported first-quarter net income of $4.29 billion on revenue that rose 27 percent to $13.76 from a year ago. Its entertainment and devices unit jumped to $1.9 billion in sales, or a 91 percent increase, from $1 billion a year earlier.

Wall Street praised the results as investors pushed shares as much as 12 percent higher, a six-year record, in morning trading Friday. Shares by midday pulled back slightly at $34.88, up $2.89, a 9 percent gain from Thursday.

The meteoric revenue rise and profitability for the division that handles Xbox—the unit hit a profit of $165 million from a loss of $142 million a year earlier—is significant for a group that has posted six annual losses.

To put it in perspective, sales in the entertainment and devices unit did two-thirds of what Microsoft’s bread-and-butter Server and Tools group and approached half of what its Business Division did.

It might soon be time to stop calling Microsoft the “software giant” and begin calling it the “gaming giant.”