4.4 million Xbox 360 consoles sold during Christmas quarter

Redmond (WA) - Microsoft today said that it has sold 4.4 million Xbox 360 game consoles during the fourth quarter of 2006. Despite the frenzy around the launches of Nintendo’s Wii and the Playstation 3, Microsoft came out on top and had the most successful console in the market.

According to the company’s 10-Q filing for the fourth quarter of the 2006 calendar year were exceptionally strong, adding to only one million units sold in the preceding quarter. Since the launch of the console in November 2005, Microsoft said that it has sold a total of 10.4 million Xbox 360 devices.

In term of plain numbers, the Xbox 360 outsold both the Nintendo Wii and the Sony Playstation 3. Nintendo is estimated to have sold about 1.8 million Wiis during the quarter, while the company claims that an actual 2 million units was manufactured. Sony has sold about 750,000 Playstation 3 units ; however, Microsoft had the advantage of selling the Xbox 360 throughout the quarter, while Sony and Nintendo launched their devices halfway through the quarter - the PS3 was introduced on November 17, the Wii followed on November 19.

At least during the current ramp of the Wii and the PS3, Microsoft may be able to use the fact that it has a mature device and a functioning ecosystem in place to its advantage : "We believe that the functionality of the Xbox 360 console, games portfolio, and online offerings are well-positioned relative to competitive consoles launched during the quarter. We also believe launching in advance of competing consoles will provide a strategic advantage for the long-term success of Xbox 360," the firm wrote in its most recent 10-Q.

Overall, Microsoft indicated that - next to SQL Server, Windows Server, and Visual Studio - it was the Xbox 360 and the Zune music player that saved the quarter for the firm and offset $1.6 billion of deferred revenues from the Vista and Office 2007 Express Upgrade program. While the company conceded that there was higher demand from system builders for the firm’s client operating systems, which resulted in a 10% increase in revenues from OEM licensing, the "revenue increase for the three and six months ended December 31, 2006 was driven primarily by sales of the Xbox 360 console which was launched in November 2005 [and] sales of Zune, [the] digital music and entertainment device, which was launched in November 2006."

According to Microsoft, Xbox and PC game revenue increased by approximately $1.0 billion or 76% during the three months and $1.3 billion (+82%) during the six months ended December 31, 2006, as a result of higher console volumes and related accessories and video game sales. The increase of video game sales was led by Gears of War, which sold more than 2.7 million units so far, Microsoft said.

Microsoft did not reveal how many Zune devices it was able to sell, but mentioned that "revenue from Zune, consumer hardware and software, and TV platforms increased [by] $260 million or 104% during [Q4 2006]. The Entertainment Devices division of Microsoft was not able to reduce its loss from Q4 2005 ($286 million) and remained about flat at $289 million. Microsoft indicated that it will take additional "significant" investments in this segment, which bill be targeted especially at the Xbox 360 and the Zune.

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