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Microsoft Predicts 3 Million Sales of Xbox

Microsoft Corp. (MSFT) expects to sell as many as 3 million Xbox 360 consoles in the first three months after launching the newest version of its video game machine, the financial chief of the giant software company's Xbox business said Tuesday.

The sales target of 2.75 million to 3 million Xbox 360 units in the first 90 days after the launch date of Nov. 22 was outlined by Xbox Chief Financial Officer Bryan Lee at an investors' conference in New York. That target comes nearly two weeks after Microsoft cautioned that initial Xbox sales might not be as high as some in the gaming industry have expected.

The interim sales target indicates that Microsoft is expecting strong sales, despite trying to play down industry expectations at its Oct. 27 earnings announcement.

The 90-day sales target totals more than half of Microsoft's target of selling between 4.5 million and 5.5 million Xbox 360 consoles by the end of the current business year to June 2006.

Lee declined to say how many consoles would be on retailers' shelves on Nov. 22 when the Xbox 360 launches, saying that Microsoft would have enough machines for a solid release and steady supply thereafter.

Microsoft has contracted with three electronics manufacturers to build the Xbox 360: Flextronics International Ltd. Wistron Inc. and Celestica Inc. The Celestica plant is expected to come online in early 2006.

Redmond, Washington-based Microsoft's Xbox 360 will debut at least three months before its main rival Sony Corp. begins selling the PlayStation 3, the gaming industry leader's next-generation console.

Current-generation Xbox sales have slowed ahead of the launch and Microsoft had cautioned that early Xbox 360 sales would not be as high as expected.

Shares were initially sold off on the news, but analysts noted that Microsoft would benefit from avoiding a big sales spike after the launch. Disgruntled customers were a problem for Sony when it launched its best-selling PlayStation 2 console in 2000.

Microsoft shares were up 2 cents at $27.03 in morning trade.

The shares are up 7 percent in the last two weeks and are trading at 24 times projected fiscal 2005 earnings while Sony is trading at 22 times projected earnings for its current fiscal year.