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The Honolulu Advertiser
Posted on: Sunday, February 5, 2006

Frustrated consumers find coveted Xbox still scarce

By Julie Tamaki
Los Angeles Times

LOS ANGELES Gripping the controller of the Xbox 360, Jesus Sanchez watched the Oakland Raiders clash with the Denver Broncos on a high-definition, flat-screen TV. The details in the "Madden NFL 06" video game looked so sharp it was almost like seeing an actual football game.

Sanchez was mesmerized, but unfortunately for him, the 360 wasn't his. He was playing a demo machine at a Best Buy store in L.A.'s Atwater Village neighborhood because, like countless other frustrated gamers, he hasn't been able to get one of his own.

More than two months after its debut, Microsoft Corp.'s newest console remains hard to find.

To be sure, temporary shortages after the launch of a new machine are common in the video game business. But Microsoft's continued inability to meet demand for Xbox 360 has irritated customers and disappointed video game publishers, raising questions about whether the company has squandered an opportunity to grab market share before consumer electronics giant Sony Corp. releases its PlayStation 3 later this year.

For its part, Microsoft said it expects the shortage to ease in coming weeks, thanks to an additional manufacturing plant coming on line, and that the balance between supply and demand should stabilize before the end of June.

June may be too late, according to some Wall Street analysts.

"Microsoft's first-mover advantage is eroding if it takes them very long to get the first 5 million boxes out," said Michael Pachter, an analyst at Wedbush Morgan Securities in Los Angeles. "If 4 million show up in the month of June and Sony launches in the month of June, there's not much of an advantage" for Microsoft.

Whether gamers like Sanchez, a 28-year-old art student, will forgo plans to purchase an Xbox 360 for the sake of a PlayStation 3 remains to be seen. Sanchez said his wife wanted to buy him an Xbox 360 for Christmas but couldn't find one.

"I heard the PlayStation 3 is coming out pretty soon too, but I haven't really compared it yet," Sanchez said. He said he was waiting to hear more about the Sony console before deciding whether it is "worth the wait."

Microsoft and Sony are locked in a battle for dominance in home entertainment. The software behemoth, still relatively new to the hardware scene, hopes to use its $399 console to overtake market leader Sony.

Sony has vast experience at manufacturing consumer electronics. It has been compared with Apple Computer Inc., flying high on its iPod music players.

"Steve Jobs will announce a product, and it will ship that day and be in pretty good supply," said Geoff Keighley, a host on G4, a cable channel devoted to video games. By comparison, Keighley said, Microsoft created "an object of desire they weren't able to deliver to the vast majority of people who were intrigued."

The scarcity of Xbox 360s which play games, music and videos in addition to exploiting the latest in video graphics and high-definition television was particularly acute during the crucial holiday shopping season. Throngs of shoppers camped out overnight in retailers' parking lots; some left empty-handed. Others sought the consoles on eBay, where more than 40,000 were sold in the eight days after the model's Nov. 22 launch for an average price of about $800.

Microsoft reported Thursday that it sold 1.5 million Xbox 360 consoles in its fiscal second quarter which ended Dec. 31, including 900,000 in the U.S., 500,000 in Europe and about 100,000 in Japan. Microsoft executives blamed shortages of parts for the lower-than-expected sales but said they were nonetheless thrilled with the console's launch, noting that it is already available in 19 countries and that software for the device is selling at a nice clip.

"We're off to a strong early start," vice president Scott Di Valerio said during a conference call with investors. "Coupled with the continued uncertainty of our competitors entering into the next generation, we are right where we want to be."