December 17^th, 2002 (12:00am) -
San Francisco, Dec. 13 (Bloomberg) -- Microsoft Corp., which turned to video games to boost revenue as personal-computer sales slowed, sold fewer Xbox machines than expected in November, at the start of the holiday shopping season, an analyst said.

Microsoft sold 468,000 Xbox consoles in the U.S. in November, Banc of America Securities Inc. analyst Bob Austrian said in a research note to clients, citing data from market researcher NPD Group Inc. That’s 33 percent less than the 700,000 Austrian had forecast.

The world’s largest software maker has struggled to gain video-game sales against rival Sony Corp., whose PlayStation 2 has outsold the Xbox by 10 to one. The start of the holiday season suggests that Microsoft’s sales from Xbox will be about $700 million this quarter, Austrian said, $400 million less than he had previously forecast.

``Industry growth rates, for both consoles and video games, may be slowing, or at least, seasonally weaker than expected,’’ Austrian said.

Excluding Wal-Mart

Microsoft spokeswoman Molly O’Donnell said the NPD report doesn’t accurately reflect all of the company’s sales because it excludes those at Wal-Mart Stores Inc., the largest U.S. retail chain. The percentage of Xbox machines sold at Wal-Mart doubled in November from October, she said, declining to give precise figures.

``The report doesn’t tell the whole story,’’ O’Donnell said. ``We feel they’ve underreported for the Xbox.’’

U.S. sales of video games and gear were expected to rise to a record of more than $10 billion this year, NPD Group said last month, buoyed by a holiday shopping season that typically generates more than half of the industry’s annual sales. Sales rose 43 percent in the U.S. last year to $9.4 billion, aided by the November release of Xbox and Nintendo Co.’s GameCube console.

The sales shortfall of Microsoft’s video-game player won’t affect profit, Austrian said, because the Redmond, Washington- based company already loses some $70 on each machine. Console makers reap the bulk of their profits through their games and those made by third parties such as Electronic Arts Inc., which pay royalties to the makers of the machines.