Microsoft Nears Xbox Equilibrium

PHOENIX -- With Xbox 360s as scarce as truffles, MicrosoftMSFT CFO Christopher Liddell has good news for game fans -- and the software giant's legions of investors: Supply and demand should be in balance in the next few months.

Speaking at the Goldman Sachs technology investment conference here, Liddell remains confident that the shortage is nearly over and the company will hit its target of 4.5 million to 5 million boxes out the door by the end of the year.

Liddell also said "he's very comfortable" with Microsoft's ambitious schedule of launching new versions of Windows and Office by the end of the year. But sounding a note of caution, he warned investors not to expect too much too soon from the parade of new products. "There won't be a huge pop (in sales)" initially, he said.

His warning seemed timely, because the market has been waiting for Microsoft's stock to break out of its relatively narrow range for years, and some analysts seem to expect a move fairly soon.

Shares of Microsoft were recently up 48 cents, or 1.8%, to $27.11.

Liddell also poured a bit of cold water on hopes that Microsoft will move much faster to distribute cash to shareholders. "I'm not a fan of special dividends," he said. "If I had to prioritize, share buybacks would be first."

That answer didn't sit well with the director of a large asset management company who questioned Liddell from the floor (and was thus anonymous under conference ground rules.) "Microsoft is still overcapitalized," he said. "And that's why the stock hasn't moved," he said.

He added that investors don't want to see Microsoft embark on a series of acquisitions. "The market fears that Microsoft will throw a lot of money to buy media or Internet-related companies. "We're strongly opposed," he said.