Microsoft's fiscal report for this quarter reveals sales of its Xbox 360 are down 60% and a huge operating loss, blamed mostly on the $1.04 billion warranty extension. The Xbox 360 has suffered some major PR and financial hits in the last few weeks and this has allowed the Nintendo Wii and Sony Playstation 3 to close the gap on this side of the ocean.

Despite the news, Microsoft profits actually went up this quarter. Sales of Vista and Office allowed them to more than offset the massive losses from their gaming division. Read more about that here.

Microsoft's growing troubles with the Xbox 360 video game console appear to be catching up to the company. Sales of the gaming machine plunged 60% in the fiscal fourth quarter, Microsoft disclosed Thursday.

In its earnings statement for the quarter, Microsoft said it shipped 700,000 Xbox 360 units during the period, compared to 1.8 million in the fiscal fourth quarter of 2006 -- a fall off of 61%.

Microsoft's Xbox operations are housed within the company's Entertainment and Devices Division. The group saw fourth quarter revenue drop 10% year-over-year to $1.16 billion on an operating loss of $1.20 billion. The group lost $423 million the previous year.

Read more here.