Microsoft's Mission Implausible

Microsoft (MSFT) aims to blow away Sony (SNE) in the video console universe with the new Xbox 360, scheduled to land on store shelves Tuesday.

But it'll take more than the largest consumer launch in Microsoft's history -- which will include a Burning Man-style gamers' mecca in the Mojave desert -- to succeed. Despite all of the build-up, industry observers doubt that the world's largest software maker will be able to take down the second-largest electronics maker in this latest clash of the titans.

"For me, there is no doubt that Play Station 3 will be the clear winner, hands-down, even in this next generation," says James Lin, managing partner of Los Angeles-based video game consultancy Simba Group.

(TheStreet.com this week also looked at how Microsoft's rivals will weather the ballyhooed rollout; how far Microsoft will make it into consumers' living rooms; what all the new game machines mean for investors; and what a game is worth.)

However, that doesn't mean Microsoft won't reap rewards. Lin, a former analyst, says, "There's no question that Xbox 360 will likely do better than the Xbox 1."

A main reason is that Microsoft has had a lot more time to strategize this time around. The company has been planning Xbox 360 since the original Xbox launched in 2001. Microsoft has used that time to create a sleeker box and put more thought into hardware specs, says David Reid, director of marketing for Xbox.

"We feel like we can win this generation," he says. "We feel like we're very much on par -- and we're out there earlier."

Further adding to the Xbox 360 buzz are expectations of shortages, since Microsoft has said it won't immediately flood retailers with supply but will instead use a "rapid replenishment program" to provide steady inventory.

The strategy has prompted speculation about production constraints -- or Microsoft trying to make itself look better. "I would say either way it's brilliant marketing," quips Wedbush Morgan video game analyst Michael Pachter.

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