Microsoft defends Xbox console, software sales

Hardware and software sales are both up sharply, the company says, fending off analyst criticisms. Meanwhile, some observers wonder whether the videogame boom is already over

Microsoft has responded to analyst gripes that its Xbox gaming console is selling disappointingly, pointing out that the unit's sales nearly doubled in November and noting strong sales of software and the Xbox online kit.

The row over Xbox sales is taking place as pundits are predicting a successful year for the videogame industry, based on figures from pre-Christmas sales. Analysts in the UK and the US are predicting strong growth in sales of videogame software and hardware, although UK retailers have warned of disappointing demand.

In a letter to analysts, Microsoft said that the Xbox's 468,000 US sales for November -- as reported by NPD Group -- represented a dramatic rise, and was nearly double the figure for October. The number does not include sales from Wal-Mart, the US' largest retail chain.

Games are doing particularly well for Microsoft's console, with 2.4 million sold in November, and six games topping 100,000 in sales during the month. Microsoft said that the starter kit for Xbox Live, the console's online service, has sold 136,000 units.

Both games and the online service are key to Microsoft's revenues. Microsoft depends on software sales for Xbox revenues, as its consoles lose money, according to analysts. The company's online service will ultimately be capable of raking in subscription revenues on top of the sales of the games themselves.

However, the numbers pale in comparison to those of Sony, which estimated it sold more than 1 million PlayStation2 consoles in the first two weeks of the Christmas shopping season. The company said this week that it is on track to sell 400,000 online gaming adapter units by the end of the year.

Sales of consoles and console games in the US are set to total more than $10bn this year, up from last year's $9.4bn, according to NPD. In Europe, market research firm ScreenDigest said this week that annual sales of video game software are to increase 23 percent over last year to $5.9bn.

The sunny figures have been undercut, however, by high-profile profit warnings by UK retailers, who say that sales do not seem to be picking up as Christmas approaches.

Game Group's shares fell sharply on Tuesday after it said that sales were "disappointing", and had been down 4.7 so far in December compared to 2001. The GameCube was selling particularly poorly and the Xbox was doing not much better, the company told analysts. The PlayStation2 is leading the market in the UK, Game said.

Game's figures led some analysts to argue that the boom in videogame sales was coming to a premature end.

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