The solid performance gives immediate ammo to the company's pleas for patience as it looks to replicate its successes with desktop software. Microsoft also has invested heavily in online services for businesses and consumers, and that division said its quarterly loss more than doubled to $264 million.
Liddell said online services wouldn't reach profitability this year. Sometimes, he said, revenue growth is more important.
That formula is finally paying off with the Xbox, though it took "Halo" to do it.
When it hit stores in September, "Halo 3" needed only a week to ring up $330 million in revenue. The game also helped turbocharge sales of the company's Xbox 360 console, which surged in September to nearly 528,000 devices in the U.S. That made it the month's best-selling console, research firm NPD said.
The consoles have cost more to make than Microsoft charges for them. But with "every console they sell, they will make $120 in profit selling games," said Michael Pachter, an analyst at Wedbush Morgan Securities.
More money comes in when Xbox owners pay $50 a year to subscribe to Microsoft's online game service. "Once the division is profitable, every incremental customer becomes immensely profitable," Pachter said.
Analysts expect the company's games business to remain profitable in the current holiday quarter as consumers snap up hot titles, even though the number of consoles sold may fall.
The immense amount of money generated by Windows and Office could help Microsoft capitalize on its gaming customers in other ways.
The Xbox could become more of an entertainment hub, driving media sales and rights-management software that Microsoft sells, Di Bona said.
Games also could include more ads, a key area for Microsoft as it tries to build an advertising business as large as its software pillars.
"They are generating more cash flow than most technology companies produce in revenue," Pacific Crest Securities analyst Brendan Barnicle said, adding that Microsoft was far outpacing Internet ad leader Google Inc.
"If they want to build an alternative media network, they are the only ones who can," he said.
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joseph.menn@latimes.com
