Microsoft Slashes Xbox 360 Sales Estimates

As BetaNews first reported early yesterday evening, during its regular quarterly earnings call, Microsoft Chief Financial Officer Chris Liddell stated he's cutting unit sales projections for Xbox 360 game consoles for the first calendar quarter of 2007, by as much as three million units.

While vigorous sales of about 10.4 million total units worldwide by the end of last year helped Microsoft recoup the enormous, though anticipated, costs of having built Xbox 360 in 2005 -- added to the costs of launching the Zune MP3 player in 2006 -- Liddell's warning seems to be a signal that the video game market may be in for a slowdown in general.

Market share projections, Liddell said, will be unchanged - meaning, Xbox 360 isn't expected to lose customers to either Sony's PlayStation 3 or Nintendo's Wii. Instead, he appeared to be giving signals that possibly rising inventory levels could be indicators of demand declining at higher than seasonal levels.

Last month, Microsoft executives provided guidance to industry analysts projecting worldwide unit sales totaling 13 to 15 million units since launch, by the end of March. Now that number looks more like 12 million, indicating projected sales of only 1.6 million units this quarter.

The downturn will also impact sales of software, accessories, and subscriptions to Xbox Live, Liddell added, potentially bringing to an abrupt end a stream of unexpectedly positive revenue from the Entertainment and Devices division.

Earlier today, Liddell told Reuters that he believes the first half of this year was always going to be slow anyway, adding that there's a "reasonable amount of inventory in the channel." Which certainly eliminates the possibility that Microsoft's running out of consoles; the problem may be quite the reverse.

Click here for details of Liddell's statements to analysts yesterday.