Microsoft today released its financial results for the fourth quarter and full fiscal year ended June 30. The company as a whole posted revenue of $51.12 billion, a 15 percent increase over the prior year. Microsoft, as expected, took a $1.06 billion charge in its fourth quarter due to the hardware defects and extension of the warranty to three years.

Consequently, the Entertainment and Devices Division (EDD), which is home to the Xbox business, posted an operating loss of $1.2 billion for the fourth quarter and nearly $1.9 billion for the full year. Revenue for EDD was down 10 percent to $1.16 billion during Q4 but it climbed 28 percent to $6.08 billion for the full year.

Microsoft shipped 6.6 million units of the Xbox 360, bringing the total installed base to 11.6 million, which is just shy of their 12 million target, as was previously announced. During Q4, "EDD revenue decreased primarily due to decreased Xbox 360 console sales, partially offset by Zune sales and increased Xbox accessories and video game sales." Microsoft said that its operating loss was mainly due to the aforementioned warranty charge (obviously), but that was "partially offset by decreased Xbox 360 console manufacturing costs."

For the full year, however, revenue climbed "primarily due to increased Xbox 360 console sales, Zune sales, and increased Xbox accessories and video game sales." In addition, the company said that Xbox and PC game revenue increased 19 percent to $650 million "as a result of the increased number of Xbox 360 platform sales, partially offset by decreased sales of the first generation Xbox console and related accessories and video games."

With the warranty charges apparently only affecting fiscal 2007, Microsoft may have a shot at finally turning the Xbox business into a profitable endeavor during fiscal 2008, especially since the company continues to mention that manufacturing costs for the console have been coming down. Perhaps this will even allow them to slash the price this holiday season, as a number of analysts have predicted. A price drop combined with games like Halo 3, GTA IV, Guitar Hero III, Rock Band, Mass Effect and others would certainly give the installed base a big push.