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Microsoft's Halo 3 Sparks 100% Jump In Xbox 360 Sales

But Microsoft's cost of revenue for its gaming division increased 99%, or $584 million, in part because of a jump in warranty-related expenses.
What a difference a biologically enhanced super-soldier makes. Microsoft reported Thursday that sales of its Xbox 360 video game console jumped 100% in its fiscal first quarter, thanks to the debut of Halo 3.

Microsoft said it shipped 1.8 million Xbox 360 consoles in the quarter, compared to 900,000 in the same period a year ago. The numbers are a stark contrast to the fourth quarter, during which Xbox 360 shipments plunged 60%.

The difference, Microsoft said, is Halo 3 -- a sci-fi based first-person shooter game starring the plasma-ray packing Master Chief. The game, which can only be played on the Xbox 360, launched in September and rang up $330 million in sales during the first quarter.

The surge helped Microsoft's Entertainment and Devices division post a first-quarter profit of $165 million on revenue of $1.9 billion, compared to a loss of $142 million on sales of $1.01 billion in the same period a year ago.

Halo 3 has, to date, broken a number of gaming industry records, including the mark for first day sales. The title pulled in $170 million on its Sept. 25 launch date.

On the downside, Microsoft said that cost of revenue for its gaming division increased 99%, or $584 million, in part because of a jump in warranty-related expenses. The company in the fourth quarter took a $1.06 billion charge against earnings to cover the cost of extending the warranty period for the Xbox 360.

Microsoft conceded that the consoles suffer from frequent hardware failures and said it's working to fix the problem.

Overall, Microsoft said its first-quarter revenue increased 27% year-over-year to $13.76 billion. Net income climbed 23% to $4.3 billion, while earnings per share increased 29% to 45 cents.