BEIJING, Jan. 29 -- Microsoft Corp has said it's taking the next step toward making its Xbox business profitable: selling fewer of the money-losing video-game consoles.

    The world's biggest software maker said on Friday it expects to have sold a total of 12 million Xbox 360 machines by June 30, compared with a previous forecast of as much as 15 million.

    Microsoft, based in Redmond, Washington, set a goal last year to make the Xbox group profitable in the fiscal year starting July 1 by cutting costs and selling more of its profitable video-game software, Peter Moore, a vice president in the Xbox division, said in an interview.

    Microsoft has pledged to make the Xbox profitable before. The company promised in 2004 that the game system would make money by this fiscal year. It then decided to take advantage of a delayed release in Sony Corp's PlayStation 3 by boosting Xbox production, raising its costs.

    "Having backed off of that once, they're not going to do it a second time," said Michael Gartenberg, a JupiterResearch analyst in New York. "When they decide to put a stake in the ground like that, you have to figure a lot of thought went into it."

    Microsoft loses money on Xbox systems and then profits from selling games such as "Gears of War." The company, which sold 10.4 million consoles by the end of 2006, books a sale when the machine is shipped to a retailer, not when it's purchased, Bloomberg News said.

    Stores have enough inventory now, Moore said. The company doesn't want to increase retailers' stockpiles, so it will probably be shipping fewer consoles to stores, reducing its sales.

    The company also is backing off costly promotions and marketing programs, Moore said. That may mean fewer sales because Microsoft won't be "driving the sale at any cost," he said.

    It's a reversal of a decision last April to increase spending to get more Xbox machines into stores, a move that's cutting profit this fiscal year.

    "That was the right decision then, but it would be the wrong decision now," Moore said. "We'd better be profitable next year. It was a commitment we made, and I'm not going to back down on that decision."

    Microsoft also may be trying to clear current inventory from stores to prepare for new models at Christmas, Gartenberg said. He said Microsoft may introduce game systems with bigger hard drives, closer ties with Windows Vista and the Zune music player and an advanced connector for high-definition video.

    Moore denied that this was part of the decision to cut Xbox production.

    The company may be clearing inventory ahead of a June price cut, Goldman Sachs Group Inc analyst Rick Sherlund wrote in a note.

    Microsoft may have planned a price cut to spur demand and decided that with little competition from Sony it can afford to wait, said UBS AG's Heather Bellini in New York.

    Another possible explanation is the company expects "Halo 3," the next edition in its top-selling game franchise, to be delayed, resulting in fewer console sales. Microsoft hasn't given a specific month for the 2007 release of "Halo 3."

    Moore said the new forecast doesn't stem from any plans for price cuts or a "Halo" delay.

    Gartenberg said Sony hasn't gotten enough of its game consoles into stores and the company's games aren't as appealing.

(Source: Shanghai Daily)