Microsoft Xbox, Sony PlayStation 3 reach targets

Microsoft and Sony, the world's two largest maker of video-game consoles, reached shipment targets during the year-end shopping season, a sign their machines will drive electronics sales in 2007.

Microsoft sold 10.4 million Xbox 360 consoles last year, exceeding a target for 10 million units, the company said at the Consumer Electronics Show in Las Vegas yesterday.

Sony's US head said the company overcame production delays to meet its goal of shipping 1 million PlayStation 3 machines to the US.

The results underscore the battle between Microsoft, Sony and Nintendo Co. in one of the consumer electronics industry's fastest growing markets.

Sales of video-game consoles may rise 23 per cent to $16 billion this year, outpacing 7 per cent growth in the industry as a whole, according to the organizers of CES.

"Sony is our most direct competitor,'' Microsoft Chairman Bill Gates said late yesterday at a dinner with reporters. "Our goal was to not be Sony, not be a big box, not be expensive.''

Microsoft, based in Redmond, Washington, sells the Xbox 360 for $300 to $400 compared with a retail price of $500 to $600 for Sony's PlayStation 3. Nintendo's Wii, introduced in November around the time as the latest PlayStation, sells for $250.

To make shipments, Tokyo-based Sony diverted parts meant for its Blu-ray DVD movie players to game consoles after a shortage of diodes limited PlayStation supplies, said Jack Tretton, Sony Computer Entertainment's U.S. president.

Stan Glasgow, president of the company's US electronics unit, said in an interview that the company had "strong holiday sales'' in the US and Blu-ray player sales won't be affected by the move.

Sony, the largest maker of video game consoles, initially stumbled with production glitches that led the company to delay the PlayStation 3's introduction last year as well as slash shipment and profit targets in October.

The company is billing PlayStation 3 as a complete home entertainment system. In response, Microsoft said yesterday it will enable the Xbox to function as a television set-top box in time for year-end holiday shopping.

The feature is another attempt by Microsoft, the world's largest software maker, to broaden its offerings beyond personal-computer programs and capitalize on higher sales of its video-game consoles.

"They're just trying to get people to think of them as more than just a PC software company,'' said Matt Rosoff, an analyst at Kirkland, Washington-based Directions on Microsoft.

``Because Microsoft has been associated so much with work software they do have a little challenge in making Microsoft a sexy consumer brand.''

Gates gave his 11th speech at the Consumer Electronics Show, joined on stage for the first time by Robbie Bach, president of Microsoft's entertainment and devices division, which includes Xbox and the Zune music player.

Microsoft introduced Zune last year to take on Apple Computer Inc.'s top-selling iPod device.

"We want people to be able to get their content whenever and wherever they want on whatever device they want,'' Bach said yesterday. "I'm very excited about the progress we've made. This ecosystem is alive, it's growing, it's burgeoning.''

Bach didn't give details on negotiations with potential Xbox partners or say what features will be enabled by the Xbox 360 when it is used as a set-top box.

Typically set-top boxes are distributed by cable companies and can offer services such as digital television, video on demand and digital video recording.

Microsoft has been trying to build a business selling television software for the last decade, and the Xbox 360 move may represent its latest attempt to bolster demand for such advanced television services, Rosoff said.

If it succeeds, the effort could also help Microsoft win more customers for the Xbox machine and related games and devices, he said.

Microsoft plans to double the number of games it sells for Xbox to more than 300 by the end of this year, Bach said today.

Separately, Microsoft said it will offer a Windows Home Server product will be sold in the second half of this year in server computers from Hewlett-Packard Co.

The home server can be used to back up data on all home PCs daily and to store photos, video and music to be played on the machines.

Microsoft also announced an agreement with Ford Motor to provide Ford with software that lets drivers use voice commands to control mobile phones and music players.

Gates talked about the agreement in a portion of his speech to be simultaneously shown at the Detroit Auto Show.

"Truly the digital decade is happening,'' Gates said today. "The key thing missing is the connections. Delivering on the connected experience requires more than great hardware.''

Microsoft shares declined 17 cents to $29.64 on January 5 in Nasdaq Stock Market composite trading. The have risen 9.8 per cent in the past 12 months. American depositary receipts of Sony rose $1, or 2.3 per cent, to $44.80. They have gained 6.5 percent in the past 12 months.

Each ADR represents one ordinary share.