Wasn't the XBox hardware pretty much sold at cost to sell their games for their own platform? How many recent games does Microsoft have for the PS or Nintendo?
All consoles (at least at launch, and for years afterwards) are sold at a loss, with profits made up on the games. The difference for Microsoft is that the XBox division has never made a profit, unlike Sony's or Nintendo's.
Note: the Wii is the only recent exception to this rule that I know of; the hardware has been sold at a profit since day one.
Note: the Wii is the only recent exception to this rule that I know of; the hardware has been sold at a profit since day one.