"Industry analysts have been estimating that Microsoft will have to absorb losses of $1 billion to $2 billion related to its effort to subsidize for the manufacturing of Xbox."

Also, manufacturing costs for the Xbox are not expected to go down, like those of the PS2, because MS outsources all the manufacturing to a company called Flextronics. In order to keep prices down Flextronics has Xbox plants in China, South America, and Eastern Europe. Workers in the China plant earn about $0.70/hour, "By manufacturing in low-cost regions, Flex can cut 75 percent of the price of labor." Oh, and lets not forget that MS dumped 1/2 A BILLION dollars into the initial marketing push for the Xbox.