Next Generation reports that the division, which houses Xbox, games software, interactive TV and the company’s Zune MP3 player reported an operating loss of $289 million for the quarter ending December 30th, more or less the same as the $286 million loss posted in the same period last year.

Despite the losses, however, total sales for the Entertainment Division reached $3 billion, a rise of 76 per cent year-on-year.

The hardware giant has now cut its shipping estimates for Xbox 360 from 13-15 million by June 2007 to 12 million. To date the firm has sold 10.4 million units of its next-gen console, with 4.4 million selling in the Christmas quarter.

“We are just being cautious about the second half – it was always going to be slow,” Microsoft CFO Chris Liddell stated. “However, 360 is still well positioned relative to competitive consoles launched during the quarter. Launching in advance of competing consoles will provide a strategic advantage for the long term success of Xbox 360.”

Microsoft also added that as well as its Xbox marketing spend, the increased costs of repairing Xbox 360 consoles and the cost of launching its Zune music player also contributed to the firm’s loss.