They lost far less then they hoped to, I imagine. The XBox is still in the lose money on each box stage, and all things considered they didn't lose much. They would have been happier losing 2 or 3 times as much, because it would have meant major market share.

I think the bit at the end is more interesting

In the filing, Microsoft also said that it had guaranteed the repayment of yen-denominated bank loans for an undisclosed entity in which it has an investment. Microsoft said the guarantees, which continue until the loans and interest have been repaid in full, had a maximum amount of $559 million at Dec. 31. It also said it could recover a portion of the guarantees if the entity was liquidated.

Which Japan based company would MS be willing to risk that kind of money for? I'm guessing it's Sega, part of the deal for the recent XBox only games from Sega despite Playstation-2 having 5 times the market share. Sega had better watch their backs, because MS isn't beyond promsing money and then holding it back on some trivial pretext to kill companies they get a stake of.

Jay