[danudey]

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.

[Lazlo_Nibble]

If I recall correctly the GameCube, DS and GBA were all profitable from day one as well. It's possible this goes back as far as the NES.