Microsoft blames Xbox shortages for lagging sales

Microsoft is citing a shortage in console availability as the reason its Xbox 360 console trailed behind competitors in U.S. sales in February.

Microsoft is citing a shortage in console availability as the reason its Xbox 360 console trailed substantially behind competitors in U.S. sales for the second month in a row in February, according to the latest numbers from the NPD Group.

Xbox 360 sold 254,600 consoles in the U.S. in February, compared to 587,600 for the Nintendo DS; 432,000 for the Nintendo Wii; 351,800 for the Sony Playstation 2 (PS2); and 280,800 for the Sony PS3. Xbox 360 console sales also trailed competitors in January, according to NPD.

"Our retailers are telling us that Xbox 360 is selling as fast as they can restock, but due to this high demand, Xbox 360 is experiencing temporary shortages," Microsoft said in an e-mail from its public relations firm on Friday. "We are working as quickly as we can to replenish inventory."

Aside from acknowledging shortages, Microsoft also painted a rosy picture around other numbers associated with sales of games and accessories for the Xbox console. In its e-mail, the company said a combination of "consoles plus content plus community" is what "makes a winning platform," and aside from console sales, Xbox 360 continues to lead competitors in other areas of the market.

According to NPD, Xbox 360 has a U.S. installed base of 9.6 million versus the Wii's 8.1 million and PS3's 3.8 million. Moreover, USUS$159 million was spent on Xbox 360 games in January, compared to US$131 million on Wii games and US$80 million for PS3 games, according to NPD, Microsoft said.

Xbox 360 games also continue to sell better than games for competing consoles and held five of the top 10 spots for titles sold for game consoles, according to NPD. Xbox 360's Call of Duty 4: Modern Warfare, by Activision, held the number-one spot with 296,200 units sold, and Devil May Cry 4, by Capcom, held the number-two spot with 295,200 units sold.

According to NPD, the total video-game market value is about US$1.33 billion, compared to US$992.2 million a year ago, a rise of 34 percent.

Of the markets for consoles, gaming software and accessories, the software market grew the most in the past year, followed by the market for accessories. The market for video game software rose 47 percent and is now US$668.7 million, compared to US$453.7 million a year ago, while the market for accessories is US$185.3 million, a 36 percent rise over US$136.1 million a year ago, according to NPD. The market for video game hardware is now US$480 million, compared to US$402.3 million a year ago.

The success of Microsoft's Xbox business is important to watch as the company strives to diversify its revenue stream and make profits in new markets, such as gaming, entertainment and advertising. Despite launching its first Xbox console nearly seven years ago, Microsoft's Xbox business has yet to be profitable, though company executives have promised it will be by the end of its 2008 fiscal year on June 30. The division that oversees Xbox 360, Entertainment and Devices, also is expected to be profitable at that time.

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Elizabeth Montalbano

IDG News Service

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