Ballmer: Xbox will capitalize on PS3 delay
Microsoft CEO says Playstation 3's November launch gives Xbox a shot to be the top gaming console.
By Telis Demos, FORTUNE reporter

NEW YORK (FORTUNE) - After Sony announced on Tuesday that the Playstation 3 won't launch until November, the Xbox 360 is in a better position to become the top gaming console, says Microsoft CEO Steve Ballmer.

"In every other generation, the first guy to 10 million consoles was the number one seller in the generation," Ballmer told FORTUNE in an interview on Thursday afternoon. "Did we just get an even better opportunity to be the first guy to 10 million? Yeah, of course we did."

Ballmer: "Did we just get an even better opportunity to be the first guy to 10 million [consoles]? Yeah, of course we did."

But Microsoft (Research) will not formally revise its projected market share for the Xbox 360, and it will not speed up production to capitalize on Sony's delay, because it's already producing the Xbox as fast as possible. "We've been saying 'make them faster' before yesterday," says Ballmer.

When the Xbox 360 launched last holiday season, Microsoft had its own missteps. Shortages led to sales of only 600,000 systems from the debut on November 22 through December 31, far fewer than Microsoft and market analysts expected.

There is still a production bottleneck because of problems with a component vendor, whom Ballmer declined to name, but he expects Microsoft to sell 5 million systems by June. "We're sort-of on track," he says, "though it would've been nice at Christmas to have one for everyone who wanted one."

Previous generations of the Playstation outsold the Xbox by a wide margin. Worldwide in 2005, Sony sold 101 million Playstation 2 units, while Microsoft sold 24 million Xboxes and Nintendo sold 21 million Gamecubes, according to UBS. Even during the 2005 holidays, after Xbox 360 had debuted, Playstation 2 sold 1.4 million units in December, according to The NPD Group, which tracks sales of video games and game platforms.

Microsoft plans "major pushes" of the Xbox 360 in France, Italy, Spain and Japan -- markets where the first generation Xbox didn't perform as well as Microsoft hoped.

"I am palpably optimistic," Ballmer says. "I think we are absolutely in the game for the market position it would be nice to have."

Ballmer dismissed Sony's (Research) expectation that Playstation's Blu-Ray DVD player will give it an advantage over the Xbox, which will soon offer an HD-DVD peripheral. "Sony's going to try and define that as a fundamental battleground, but I don't think it is a fundamental battleground," he says. "I don't care whether it's Blu-Ray or HD-DVD, there's not going to be a lot of content in either format this year."

For now, Ballmer says, the timing advantage is all that matters. "It's not going to be that way forever," he says, "but we're clearly in the phase where it's about how fast we can make them."

More from Ballmer's interview with FORTUNE magazine will be featured in the next issue, on newstands March 23.


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