Microsoft Says Xbox Sales Still Slow

Microsoft (MSFT Quote) on Friday admitted what much of the industry already believed -- Xbox sales are sluggish.

"At our [second-quarter] earnings announcement, we reported that we will end the fiscal year within the sales range originally forecast, but in the bottom half of that range, and for that reason we have asked suppliers to make applicable adjustments," the company said. In its October earnings call, the company said sales of the Xbox were lower than expected, but would be in the range of 9 million to 11 million by the end of June 2003.

The statement made no mention of how much production of the video game console will be cut. Ironically, slow sales of the console will actually help Microsoft's financial picture because the company loses an estimated $100 on each unit sold.

The slowdown is already hurting Microsoft's suppliers.

Focus Enhancements Inc. (FCSE Quote), which makes video chips for the Xbox, said earlier in the day it had been informed by Microsoft that the software giant's component requirements for the first half of 2003 had been reduced. The stock was hammered in regular trading, down 77 cents, or 26.6%, to 77 cents.

Nvidia (NVDA Quote), which also makes chips for the Xbox, was also down, but not nearly as much. The stock lost 12 cents a share, or 1.15%, to $10.20 a share in after-hours trading.

But investors in Flextronics (FLEX Quote), which manufactures the video console, were unfazed by the news; the stock was up 33 cents, or 4.1%, to $8.40 in after-hours trading.