Analysts: hardware shortages intentional
Industry watchers speculate on reasons for Xbox 360 and Wii January sales shortfall.
By Brendan Sinclair, GameSpot
Posted Feb 15, 2008 2:23 pm PT
The industry-tracking NPD Group released its US retail sales data for January late yesterday, and the numbers showed slumping hardware sales down 25 percent year over year. The Wii and Xbox 360 in particular sold short of analysts' expectations, as Nintendo's console led the field slightly at the 274,000 mark, with the Xbox 360 bringing up the rear with sales of 230,000.

Today a number of analysts sent investor notes out explaining their take on the numbers, suggesting that Nintendo and Microsoft made decisions that they knew would lead to shortages.

On Nintendo's side, Wedbush Morgan Securities' Michael Pachter and the simExchange's Jesse Divnich both suggested in their NPD recaps that the company's attention was focused elsewhere.

"It appears that Wii shortages were compounded by diversion of supply to Japan in order to support the launches of Wii Fit and Super Smash Brothers Brawl," Pachter said.

Such support appears to have helped, as Wii Fit reached the million-unit sales milestone in Japan last month, while Super Smash Bros. Brawl matched that feat earlier this month.

As for Microsoft, the company yesterday acknowledged shortages and explained its hardware sales position in a press release. According to the company, "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. We are working as quickly as we can to replenish inventory."

Pacific Crest Securities' Evan Wilson didn't entirely buy into the company's explanation.

"Microsoft has said supply constraints are dampening 360 sales, which is consistent with our checks, especially of the Elite," Wilson said. "However, we find it hard to believe that an underestimation of demand led to significant constraints given recent sales volume. Constraints seem more likely due to component restrictions or an intentional drying of the channel in front of a new-product launch."

Rumors of a new Xbox 360 hardware configuration featuring a built-in HD DVD player popped up earlier this year. However, if such a project were ever in development, it seems unlikely to see the light of day, at least in its rumored form; a recent string of HD DVD setbacks has the format's primary backer Toshiba reportedly on the verge of abandoning it entirely. Other supposed features for the system, such as a larger hard drive and built-in Wi-Fi support, remain on the wish lists of many Xbox 360 gamers.

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