Xbox May Be Behind Schedule
Microsoft Corp. is several weeks behind schedule producing its Xbox video game console, but the much-hyped device is still expected to reach stores by its November launch date, according to a report by analysts at Thomas Weisel Partners.
“We’re still marching toward our planned Nov. 8 launch,” Microsoft spokesman James Bernard said.
Microsoft is committing about $10 billion to the Xbox project, and the company is counting on a holiday season push to release its first game console. When Xbox, priced at $299, hits the market, it will encounter stiff competition from long-standing game companies Nintendo Corp. and Sony Corp.
With so much money at stake, Wall Street is watching closely for signs that Microsoft may slip on its promise to deliver 600,000 to 800,000 consoles to North American store shelves Nov. 8 and 1 million to 1.5 million by year’s end. The company has not said when it will release Xbox in Japan and Europe.
Microsoft is eager to avoid the troubles Sony had for the U.S. launch of the PlayStation 2 machine last year, when parts shortages halved the number of units Sony had promised to deliver, driving some consumers to buy rival systems.
“Multiple sources throughout the Xbox supply chain have confirmed that Xbox is currently delayed by as much as three to four weeks,” wrote Eric Ross, an analyst with brokerage firm Thomas Weisel Partners. “The cause of the potential delay is likely a flaw in Intel’s motherboard design. . . . This doesn’t mean that Xbox will have a late delivery date.”
“There’s absolutely no problem with the design of Intel’s motherboard,” Microsoft’s Bernard said. “Intel has been a fantastic partner and has delivered everything for Xbox to date.”
The Xbox is being manufactured in two plants, one in Hungary and another in Mexico. Microsoft is considering opening another plant in Asia. Company sources say that although there have been delays, Microsoft has built in enough slack in its production schedule to accommodate those setbacks.
Nintendo plans to launch its next-generation GameCube console for $199.95 on Nov. 5, and Sony continues to sell its $299 PlayStation 2 console. Sony, the clear leader and the rival at the center of Microsoft’s cross hairs, has placed PlayStation consoles in one out of three U.S. households over the last six years.
Analysts expect Microsoft to lose up to $125 for every Xbox machine it sells. The company hopes to make up the loss by collecting a $7 licensing fee from game publishers for every game sold, analysts said.
Microsoft’s shares fell $1.14 to $64.69 on Nasdaq.
Times wire services were used in compiling this report.
