“While next generation hardware unit sales are more modest than they were in the analogous period of 2002 (when console prices averaged under $200), recent price cuts and new hardware (slim PSP and the 40Gb PS3) and the release of key games (Halo 3 and Guitar Hero III) triggered a spike in hardware sales over the last few months that we believe will continue over the remainder of the year. These figures imply that Microsoft will sell 1.5 million Xbox 360s in December in the U.S., that Nintendo will sell 1.7 million Wiis, and that Sony will sell around 800,000 PS3s. This is about double the number of consoles sold last December, and suggests that the holiday will be a good one for the U.S. publishers. Nintendo remains the least promotional of the three hardware manufacturers due to the strength of its Wii, with demand expected to outstrip supply well into next year. We expect supply and demand to be in balance by April, with U.S. Wii sales of around 6 – 6.5 million units per year in 2007 and 2008.” – Wedbush Morgan analyst Michael Pachter

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