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Microsoft Makes an Embarrassing Admission

The manufacturer of the Xbox console wants regulators to approve its biggest deal ever.
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The videogame-console war is a match among three giants: Sony  (SONY) ,  Nintendo  (NTDOF)  and Microsoft  (MSFT)

Generally, Sony and its PlayStation are generally considered the leaders, closely followed by Nintendo and its Switch. Microsoft and Xbox occupy third place. 

Even if this ranking holds among many experts, the three companies surely aren't making it easy for them: The tech giants don't regularly release sales data for their consoles, leaving pundits to play a guessing game.

But the more the gaming industry grows, the more the interest in the market share of the various players garners attention. This has taken on even more importance during the wave of mergers and acquisitions. 

Microsoft notably drew huge attention last January by offering $68.7 billion for videogame publisher Activision Blizzard  (ATVI) . Activision owns popular franchises like "Call of Duty," "Candy Crush" and "Warcraft." 

Microsoft Sold Far Fewer Consoles Than Sony

In the framework of Brazil's antitrust authority, CADE, reviewing the ATVI deal, Microsoft has just made a disclosure that will delight the experts but appears like a embarrassment for the Redmond, Wash., software and cloud giant. 

Indeed, in a document submitted to CADE, Microsoft indicates that sales of the Xbox One, the first generation of its console, were half those of Sony's PlayStation 4 (PS4) over its lifetime.

"Sony has surpassed Microsoft in terms of console sales and installed base, having sold more than twice as many [as] Xbox in the last generation," the company writes in this 25-page document in Portuguese. (TheStreet translated the document. The disclosure is at the beginning of page 18.)

Sony recently said that it sold 117.2 million PS4s, which means that if Microsoft's statement holds, the Xbox One sold 58.6 million units or fewer. Nintendo's Switch has sold 111.1 million units so far.

Microsoft's revelation aims to convince the Brazilian authorities that competition in the sector is strong enough to allow the deal to go through. That's contrary to the concern expressed by Sony, which seems to oppose the Microsoft-Activision transaction.

Microsoft Is Catching Up

Microsoft declines to specify Xbox sales figures since 2015, saying it prefers to focus on other barometers to measure the success of its console.

"Xbox hardware revenue declined 11% and 8% in constant currency," Chief Financial Officer Amy Wood said during the company's most recent quarterly-earnings' call on July 26, without specifying the number of consoles sold.

"We’ve sold more consoles life-to-date than any previous generation of Xbox and have been the market leader in North America for three quarters in a row among next-gen consoles," Chief Executive Satya Nadela also told analysts during the same call. 

Indeed, according to analysts, Microsoft has learned from previous Xbox One-related errors as it developed its new Xbox Series S/X console, which seems to be catching up to the PlayStation 5, Sony's next-generation console.

According to research firm Ampere Analysis, Sony sold 17 million PS5 family consoles in 2021, while Microsoft sold 10.5 million Xbox Series, a difference of 6.5 million units.

But the firm cautioned: "At this early stage the global sales momentum is with Sony, but it will be frustrated that its potential has been undermined by product availability."

"In a similar way to Sony with the PS5, Microsoft has suffered substantial shortages to its high-end Series X device, undermining its potential in the market to an extent. Microsoft has also used Series X components to upgrade its cloud gaming servers, putting additional pressure on consumer availability of its flagship console."

GameLuster was the first to report about Microsoft's disclosure.