Analyst: Xbox 360 supply "disrupted"

Goldman Sachs analyst Rick Sherlund says production capacity limiting shipments; demand outweighing supply.

Basic economic theory is built on the idea of supply and demand. Microsoft's Xbox 360 clearly has the latter, but the limited former has gamers chomping at the bit.

"It is clear that something disrupted the supply of Xbox 360 shipments," says Goldman Sachs analyst Rick Sherlund, according to a report from Forbes.com. "And there does not appear to be any end of year catch-up in shipments."

Sherlund believes that 1.3 million Xbox 360s have shipped worldwide through the end of 2005, its first 40 days on the market.

If that estimate is correct, Microsoft must ship an equal number of consoles in the next 50 days, or it won't make its self-stated goal of shipping a minimum of 2.5 to 3 million units in the 360's first 90 days on the market. However, reports from retailers say the second shipment of 360s, which went out just before Christmas, was a mere trickle compared to the initial shipment.

Microsoft may not only be taking a hit by not producing enough Xbox 360s to satisfy demand. Anticipation for the next-gen console is keeping the market for the original Xbox and its software at a standstill--NPD Funworld's numbers for November showed a 75 percent decline in Xbox hardware sales.

"We expect pent-up demand for the next two quarters to drive Xbox [360] revenues, so the issue at hand is production capacity and not demand," said Sherlund.

108 Comments

  • nietsloffe

    Posted Jan 5, 2006 5:53 pm PT

    why buy a systeem if it doesn't have rpg's

  • phantom1907

    Posted Jan 5, 2006 6:45 am PT

    i am waitng for a 360.I will buy from gameseek.But it is out of stocks.

  • MicroUziSMG

    Posted Jan 4, 2006 3:37 pm PT

    To all of you who claim Microsoft went all out and tried to sell as many consoles as they possibly could in the christmas run up ... dont be so damn gullible. They have hundreds and millions of these things stored up in a warehouse or fifty while it looks like their console is 'so damn popular it sold out!!!111!!eleven!!'. In reality, they only released like ... two of them. Shops over here had like ten units at the most, even the major supermarket only had six. If Microsoft were really trying to get them sold in the run up they could have done it easily. Theyll keep you waiting for another couple of months and then theyll carpet the market.

    Anyway, where do you suppose they got all the 'replacement' units for the ones that were broke?

  • mrimkeit

    Posted Jan 4, 2006 2:51 pm PT

    That is just sad for Microsoft. This will hurt their goals for a large installed base before the PS3 comes and whups on them. Sony must be laughing.

  • andreworeilly

    Posted Jan 4, 2006 1:32 pm PT

    Although i'm disappointed that I still don't have an xbox 360, I think its almost a good thing I didn't get one since I can now wait for the next generation of 360's and not have to worry about any defects.

  • benaal

    Posted Jan 4, 2006 12:59 pm PT

    I and a dozen friends all bought xbox 360s at launch. I absolutely love mine in every way, from the LIVE arcade to Perfect Dark Zero, to Dead or Alive 4, to Project Gotham 3. With Geometry Wars, and the enhanced LIVE experience, with brilliant tournament and competitive play and leaderboards, integrated achievements across all my games to compare with a hundred of my closest friends, it is graphically gorgeous, supportive of HD graphics, inexpensive, and fantastic as a media center. I have never had any technological problems of any kind and have never seen a console that does so much so well.

    I can see that a lot of you like to criticize and complain and will dump your money into a PS3 whenever they figure out what they are going to do about an optical drive or an internet system, sight unseen and without any franchise that can compare to Microsoft's Halo, DoA, Ninja Gaiden, PDZ, etc. or Nintendo's Zelda, Metroid, and Mario exclusive content.

    Still, I have to ask one favor:

    WILL PEOPLE WHO HAVE NO IDEA WHAT THEY ARE TALKING ABOUT PLEASE STOP TALKING? If you think people manipulate supply in the ways you are talking about here on purpose, please stop playing so much and go get an education. If you don't have certified statistical reports on the numbers of systems with problems, we really have no interest in your speculations on that point.

    Sure there are about a million things that they could have done better, which will be the case with Sony's delayed launch and every other console launch from now till the end of time, but there are millions of things that I have never seen done better by any console or any console manufacturer, so why all the hate?

  • jaefrmbk2k

    Posted Jan 4, 2006 12:32 pm PT

    it's soo hot inside my xbox 369....mmm..like a warm american pie..

  • hirushubi2

    Posted Jan 4, 2006 12:14 pm PT

    Josh B. Has no idea what he is talking about. I agree with the person who posted a couple after his. Even though the original xbox did launch for 300 bucks that doesnt mean anything you still had to buy the highly overpriced acessories and games to get the most out of the system which did cost you anywhere from 350 to 450 bucks. So this is the point anytime your looking to get a new next gen console right out of the gate at launch date excpect to have to pay alot! (except for maybe the revolution)

  • snout7

    Posted Jan 4, 2006 11:57 am PT

    wow.. never skimed though so many comments saying the same thing

  • Sydwynder

    Posted Jan 4, 2006 10:46 am PT

    This happened with PS2 as well, so no one should be surprised. I knew there would be a huge demand, so I prepaid mine back in JULY. Not a tough concept people. SEE YOU LATER SUCKERS!!!!

  • kappachan

    Posted Jan 4, 2006 10:34 am PT

    When the Xbox360 was the thing to get, I went out looking for it only to come back empty handed. Even in the 2nd shipments, people stood outside for 12 hours just to get their hands on one and that didn't even guarantee I'd get an Xbox360. I had better things to do than waste my time standing around. If Microsoft even manages to their target number out within the 90 days, I am NOT going to buy one. It's pure BS and I've already spent my money on other things. As a consumer I have a choice and I choose not to support the people who let me down.

  • landau492

    Posted Jan 4, 2006 10:23 am PT

    timthyt is not willing to accept that the 360 sux

  • timothyt

    Posted Jan 4, 2006 10:11 am PT

    I don't know where monstabon and his friends got their 360s - I and 5 friends bought them and none of us have had any problems at all. I'm actually looking to buy another one for another room - watching videos and pictures from my Media Center PC is a lot cooler than I expected it to be.

    I think MS will totally pull off 3 million by 90 days. My feeling is that they don't want to ramp up production too much or they'll end up with units on the shelves around March and then have too much production capability. Think about it - if they're subsidising $100-$300 per console hoping to recover that on games, controllers and Live purchases, the last thing they want is one sitting on a shelf.

    I'm no expert on the subject, but from what I've read it's just rediculously expensive to start up a new manufacturing center. They probably have the 2 in China at capacity and will just leave it at that unless they see a long-term consistent demand, and it's probably too early to know how consistent it will be. (there - now I'm an analyst haha)

  • 50shot

    Posted Jan 4, 2006 9:59 am PT

    the sad thing is, most of my friends gave up looking for one and doesn't really care about it. while im busy playing pgr3

  • nizzynova

    Posted Jan 4, 2006 9:55 am PT

    Microsoft is trying the Cartman strategy. You cant have one nananana. They can do what they want until Ps3 & Rev come and kill there sales. Then It'll be mad easy to get a 360.

  • lookbehindyou

    Posted Jan 4, 2006 9:49 am PT

    its ok when you SELL OUT every shipment you ship....keep up the good work microsoft and BRUSH YOUR SHOULDERS OFF.....the haters are on them....screw sony fanboys and there lies aboutt he 360....they are scared poop-less.

  • Paul_TheGreat

    Posted Jan 4, 2006 9:43 am PT

    Should I be surprised.

  • monstabon

    Posted Jan 4, 2006 9:38 am PT

    I think the problem is that they are breaking faster than they can build it me and my freinds (4 of us) all bought our 360's at the same time and by the first month we all had to ship them back to microsoft (that dreded red ring of light) We also had problems getting our repairs cause they said the repair room was so backed up. I called 18004myxbox and it has taken me 2 1/2 weeks just to ship it to them for repairs. We are not the only ones eithier I know atleast 17 people with a 360 an only about 8 of them still have the oringinal system

  • NeoJedi

    Posted Jan 4, 2006 9:23 am PT

    Wow, no kidding!!

  • GothicBlack

    Posted Jan 4, 2006 9:18 am PT

    I am curious as to how long you had those PS2's before they showed issue. I'm of the idea that M$ would NOT hold back product to push demand. The demand is/was there. They pushed to be the first in the market just to capture the demand of the first adopters and the ones that have to have it *NOW* marketing strategy says that they'll do a price drop to compete for sales next year to stifle the PS3 release.

    As for them doing this to "fix a problem"...have you ever bought a version of windows? While on a completely different level (and honestly my cheap jab) everyone knows you don't admit a problem until it's on the nightly news. Look at the president (ok...another cheap jab). You sell to the bottom line to create cash flow. Once you get their money you can always replace them or hope that they work until the warranty runs out. And those that have spent $300 in games and accessories will likely go and buy another.

  • S7ATER

    Posted Jan 4, 2006 9:08 am PT

    All I can say is I told you so.

  • jaefrmbk2k

    Posted Jan 4, 2006 8:04 am PT

    now i have to buy a Ferrari Modena to get my 360/PGR fix

  • LordAndrew

    Posted Jan 4, 2006 7:57 am PT

    That told me absolutely nothing

  • necrogodomega

    Posted Jan 4, 2006 7:48 am PT

    Actually I have played those games.

    COD2 looks like the PC version, not better, and the online part is horrible.

    Condemned has some nice things. The AI is great, but just look at the floor on any of the levels, it's horrible graphics. The walls look nice, but they copped out on many other areas when they clearly could do better.

    DOA4 has nice backgrounds, but that's it. The characters look only slightly better, and have horrible clipping issues with long hair and clothes.
    Plus the trailer that ran forever at Gamestop had the monkey level with TONS of monkeys, but the actual in game level has only a few monkeys and they never really yell.

    Now I know the system can make better games, but because they didn't have the proper time to develop them this is what you get.

  • angelbimbo

    Posted Jan 4, 2006 7:42 am PT

    i knew this would come ( hey M.S is tryin to sell something ''amazing'')

  • jaefrmbk2k

    Posted Jan 4, 2006 7:33 am PT

    I CAN'T play DOA, COD OR Condemned cuz i can't BUY the DAMND CONSOLE!

  • gan283

    Posted Jan 4, 2006 7:25 am PT

    They could be disrupting their supply on purpose in anticipation of the Sony launch date....which is probably the dumbest thing they could do but a possibility

  • bioniccommando1

    Posted Jan 4, 2006 7:24 am PT

    [This message was deleted at the request of the original poster]

  • bioniccommando1

    Posted Jan 4, 2006 7:23 am PT

    If they keep this up people will just say the heck with it and wait for the PS3. Wich is a shame because that will hurt the Xbox's installed base.I usually get all the major systems so I really hope that the 360 can be a good rival to the PS3. So they'll get all competitive and make kick ass games for both systems! That way I'll win both ways!

  • dru26

    Posted Jan 4, 2006 6:42 am PT

    My 360 works perfectly fine. As compared to the two ps2s I had to replace because of disk read errors, did Sony rush those out? In regards to games, there hasn't been a 360 game I've played that doesn't look gorgeous in 720p. I'm not a Sony hater at all but I don't understand why people talk all this garbage about MS. Go play DoA4, CoD, or Condemned and then tell me how bad the 360 is.

  • Benny_is_here

    Posted Jan 4, 2006 6:42 am PT

    Not good at MS' part at all... Now all the MS haters laugh of the faulty (most people screw up the system themselves) "Xbox 1.5" (which is a stupid thing to say as it's barely out) and people that were considering to buy it will probably wait for the PS3.

    And another thing: When seeing the clearly CG movies of PS3 games, and then comparing them to that off the poor launch titles, many would make the assumption that Xbox 360 is turd compared to PS3.

  • SavoyPrime

    Posted Jan 4, 2006 6:30 am PT

    Looks like MS dropped the ball alittle early. They better have their stuff together (and some damn good games) by time Sony arrives with the PS3.

  • otakuboy68

    Posted Jan 4, 2006 6:30 am PT

    yeah well, this is a great lesson for SONY, on what not to do.
    Xbox is screwing them selves b./c they are prolonging the development of software and hardware for the 360. If noone has the system, no one is going to buy the games of accesories. i went into besbuy the other day and all i saw was piles of 360 games and accessories everywhere. whos going to buy it before they get the system? nobody! imagine all the resources that went into the development of those accesories that could have been put into making actual consoles! i bet a total of two people in that store actually had a 360. TERRIBLE.

  • YukoAsho

    Posted Jan 4, 2006 6:00 am PT

    Very poor on Microsoft's part. THey launched the original Xbox much better than this. To say that this console release was rushed is an understatement. Microsoft needs to get its' act together, or they're just handing their meager share of the market to Sony and Nintento again.

  • powermo10

    Posted Jan 4, 2006 5:59 am PT

    true story

    I've got my 360 at launch(I was so happy...),I've done the lineup and all the 360 were sold in a half-hour ----the xbox 360 is hot,in fact so hot that he is melting from inside. Yeah they are holding them back but not for marketing reason, because they have a real problem to fixed.
    If everything was ok they would have ship a lot more for christma$$$$

    Now I'm in the lineup to have the line at microsoft / ""costumer support""

    I have a 360 that doesn't work since five days so don't be in a hurry to get one wait to see what is happening with this; are they gonna do massive recall and change the cooling system..... (I have not been wise and wait when you rushed you don't think and do crazy mistake)

    something is wrong with it and they have just stop the bleeding and will be back on the wright foot

  • dwmorrow

    Posted Jan 4, 2006 5:56 am PT

    Just import one from Japan, cuz demand sure ain't exceeding supply over there.

  • chrisdojo

    Posted Jan 4, 2006 5:14 am PT

    did anyone ever mention.....rushed launch???

  • firebirdboi06

    Posted Jan 4, 2006 4:28 am PT

    how true...

    Maybe the reason for the decrease in supply is to correct the overheating defect? But at the same time I suppose the decrease in supply could be a marketing strategy to increase the desire to get the hardware in the potential buyers still waiting to get one. Curse my economic studies for making me think this early!

  • theonlyJZ

    Posted Jan 4, 2006 4:02 am PT

    It's true that they rushed it out too soon. There were stories of development kits going out as late as AUGUST!!!! Then look at some of the games. Few have any "next-gen" graphics. Then of course there is Madden which has less play options than the one for the PS2 and the 'Box. Here's another thought on the shortage, what about all the hinky ones that were out there that MS has to replace. This reminds me of the PS2 shortage and now I'll bet Sony is laughing it's ass off that it took the extra time, hopefully to work out the bugs AND have enough units to sell. I had heard and at the time believed the MS caused the shortage on purpose idea. But, it doesn't hold water. Why? To drive up demand? The demand was already there more than six months ago. Also why do that after you've made the lofty claim of selling nearly 3 million units in 90 days. They just royally screwed up in every aspect. From the reviews I've read of the games (before you say anything about reviews, I read six mags including OXM) and few of the games were well received. Esp. "Dark" and the appearance of the LONG delayed (and originally 'Cube bound I think) "Kameno" I think Sony and MS switched places. The PS2 came out sooner but didn't have the units and wound up supposedly lacking in the graphics dept. MS, slapped a console together (out of PC parts LOL) and didn't have the same probs and had the "graphics" edge. Now, it's MS who jumped the gun and Sony BETTER use this to their advantage. Plus I can't wait to see the PS3 version of FFVII at launch!!!!

  • amogley

    Posted Jan 4, 2006 3:22 am PT

    if they leave it too long, then they might find potential customers wavering and waiting to see what the PS3 delivers.

  • mhder

    Posted Jan 4, 2006 2:46 am PT

    It doesn't matter what microsoft does because You people will still buy it. That's the problem with the recent generation of gamers... It's not the quality of games etc - it's the brand that sells and as long as MS knows there are Sony and Nintendo haters out there, they won't really worry. As long as they can deliver one of these days, they know they'll always have people to buy their products.

  • dryden555

    Posted Jan 4, 2006 2:22 am PT

    All it takes is one good game for the 360 to come out 2 months from now and we'll all forget about what happened at launch.

  • ddaryl

    Posted Jan 4, 2006 2:20 am PT

    LMAO

    MS really screwed the pooch here.

    i was smart. Pre-oredered 2 units in May of 2005 and sold one on ebay for $880.

    The Xbox 360 has been ok, but the online play of Call of Duty 2 is terrible and no one at MS or activision seem to interested in fixing the problem. LAG LAG LAG.

  • anthony_basic

    Posted Jan 4, 2006 1:48 am PT

    This is so dumb for MS to do. a lot of consumers like me did not get an xbox 360 for christmas. Simultanous launch shouldnt have happened. I see people in stores buying xbox simply because xbox 360 was not on stock.

  • minos30

    Posted Jan 4, 2006 12:45 am PT

    microsoft hasn't given me a good reason to buy the xbox 360. Its not an innovative system it just looks better and sounds better or maybe... its not the system its the poor lineup of launch games... they all look rushed and last minute...
    the people i know that have an xbox 360 feel this was a marketing strategy to get the systems out there before christmass even though they weren't ready games or the system wise... proof of all this is all the flaws the xbox has.
    in my opinion waiting to see what the next batch of games coming out for the system have to offer. buying one now seems.... hmmmm... rushed.... that is for the hardcore gamers.
    hardcore gamers will only buy the best.
    newbies buy cause everyone has one.

  • Bronzidious

    Posted Jan 4, 2006 12:24 am PT

    Look, I dont agree with MS doing this on purpose. From my point of view they wanted to rush to market before PS3 to get to very important jump on the competition. Now they have shot themsleves in the foot for two reasons; one, everyday that passes without a 360 on shelves is a day closer to PS3 on the shelves (Hell I would have bought a 360 but I might as well wait for PS3) Second I am not very enticed by the games that are hitting the market right now. This machine is capable of so much more but again rush to market has sacrificed quality in both software and Hardware.

  • dru26

    Posted Jan 3, 2006 11:40 pm PT

    Dude, unless your playing an rpg , developers aren't going to make games any bigger or longer then 25 hours, because they think that's what the casual gamer wants, so disk size isn't going to make much of a difference. Besides the fact that games can come on multiple disks if the need arises.

  • kokidkane

    Posted Jan 3, 2006 11:25 pm PT

    Cant wait to get my ps3 Its going to be soo tight I just cant wait. Alot of people talk about the specs, but hey ps3 will get that but whats really going to count is going to be the games on that blue ray wow 54gigs damn you cant put a game past or up to 10gigs on a dvd so those that think it wont make a diff think a lil harder and tell me if I can fit 5 times the game on one disk how that wont make a diff lol read um and weep.

    Gears of war
    Kameo
    Condemed
    call of duty
    king kong

    all on one disk that is blue ray hmm got you thinking now dont I.

  • dru26

    Posted Jan 3, 2006 11:21 pm PT

    I watched people going into Gamestop trying to pre order 360s in November, which I personally found hillarious. I pre paid for mine in May and got it the night it came out, I recommend people do the same when ps3 pre orders become available to avoid all the bs, not wait for the last minute.

  • Allan_X

    Posted Jan 3, 2006 11:17 pm PT

    I'll be waiting 'till the next version/hardware update is out, which could be as early as April, from what I gather.

advertisement

Hot Stories

Newsmakers

Featured Stories

Tags

xbox 360

Submit News

Got tips? Send them in!

Recent News

See All News »

Site Blogs