After having the next-gen console race to itself for a year, the Xbox 360 has been in a three-way battle since the PlayStation 3 and Nintendo Wii launched in November 2006. After being roundly outsold by the Wii for most of last year--save for September, when Halo 3 debuted--the console found its sales bested by the PlayStation 3 in January and February. In March, the 360 triumphed over Sony's console by a mere 5,000 units.

　　However, despite the competition, the Xbox 360 is helping Microsoft turn a profit the size of many country's entire economies. According to an earnings report filed today, the software giant's Entertainment and Devices Division--which includes income from the Xbox 360, Games for Windows, and Zune multimedia handheld--saw its quarterly revenue surge 68 percent.

　　For the three months ended March 31, the division saw $1.57 billion in revenue, up from $936 million the prior year. However, operating income for the period was just $89 million--an improvement over the $324 million loss the company took the year before, as outcry over widespread 360 hardware failures was reaching a fever pitch.

　　In a statement, Microsoft called out the division as being one of the crown jewels of its multibillion-dollar empire. "The Entertainment and Devices revenue for the quarter grew 68 percent over the comparable period last year driven by robust demand for Xbox 360 consoles," the company said. "Cumulative console sales surpassed 19 million during the quarter, up 74 percent from a year ago." For the nine months ending March 31, the department took in $6.57 billion, a year-on-year increase of $1.65 billion.

　　Overall, Microsoft beat analyst expectations, despite a sizable drop in profits. The January-March period saw it earn $4.39 billion on $14.5 billion in revenue, down 11 percent from the same period in 2007. Earnings were hurt by a $1.42 billion fine levied on the company by the European Union and helped by an 18 percent rise in server and tools division revenue.

　　For the current April-June quarter, Microsoft estimates it will have operating income of $5.8 billion to $6.2 billion on revenues of $15.5 billion to $15.8 billion. For the financial year ending June 30, 2008, the company expects operating income of $26.7 billion to $27.4 billion on $66.9 billion to $68.0 billion in revenue.