Xbox 360 supplies seen tight through holidays-analyst

Microsoft Corp. has worked to keep retail supply expectations low for its new Xbox 360 video game console, and is not likely to deliver more than expected units before Christmas, an analyst said on Tuesday.

American Technology Research analyst Paul-Jon McNealy said in a research note that Microsoft would be challenged to ship 1.5 million to 1.8 million Xbox 360s worldwide by the end of December.

"We believe that (Microsoft) has tried to keep expectations low for retailers this holiday with the hopes of over-delivering. We believe that over-delivering is unlikely at this point," McNealy said.

The software giant is aiming to sell 2.75 million to 3 million Xbox 360s in the first 90 days after its launch in late November. A Microsoft spokeswoman could not immediately be reached for comment.

McNealy said he believed Microsoft had 300,000 to 400,000 units in North America for the launch, around 300,000 for the European launch and 100,000 for the Japan launch. He expects Microsoft to ship another 300,000 units in the next week in North America, which would put the total at about 1 million units. Additional shipments would be required at month end to reach McNealy's 1.5 million to 1.8 million target.

However, McNealy now expects shipments to be at the lower end of his target.

The Xbox 360 debuted in North American on November 22 and in the following weeks in Europe and Japan -- the top three video game markets. The units briskly sold out in the U.S. and in Europe and remain in short supply, but Japanese sales were tepid.

On the video game side, McNealy said checks of retail sales over the past week show ongoing weakness. He added that additional price cuts or promotions are likely over the last 12 days of the holiday shopping season.

Video game publishers such as Electronic Arts Inc. and Activision Inc. have been cutting prices or offering special discounts in an effort to move games.

The industry has been in flux as consumers save and wait for new gaming consoles like the Xbox 360 as well as the upcoming PlayStation 3 from Sony Corp. and Nintendo Co. Ltd.'s Revolution.

"We continue to believe that the retail environment, which has been weak, may rebound to flat, but that over-performance in sales to make up for disappointing retail sales in November and early December in North America is unlikely," McNealy said.