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Electronics Production | November 04, 2005

Xbox 360 set for a slow start

Microsoft has contracted Flextronics, Wistron, and Celestica to keep up the production for its new Xbox 360 video game console. Now it appears that the Software Giant may get off to a slower start than initially expected.
Microsofts' new Xbox 360 video game console may get off to a slower start than initially expected, but Microsofts' plan to keep production steady and expectations low may help it win against rival Sony Corp, according to RedOrbit.

Microsoft has cautioned that early Xbox 360 sales would not be as high as expected. Chris Liddell, Microsoft CEO said to RedOrbit that there wouldn't be a big initial spike and promised that Microsoft would be able to ship between 4.5 and 5.5 million Xbox 360 consoles by the end of 2005 until June 2006. For the launch later this month, analysts expect Microsoft to ship between 1.5 million and 2 million consoles.

Three EMS Providers have been contracted by Microsoft to build the Xbox 360. These are Flextronics International Ltd., Wistron Inc. and Celestica Inc. Microsoft is expected to have Celestica to producing Xbox 360 consoles from January 2006, which will also increase supply ahead of Sony's spring launch of its next-generation PlayStation 3 console.

“Console makers such as Nintendo, Sony and Microsoft loses money on each console sold. However they make that up in game title royalties. Given the business model for the consoles the more Microsoft can backload those hardware sales, the better it is for them financially”, according to Matt Rosoff, analyst at Directions on Microsoft, an independent research firm.

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