Microsoft Xbox 360 Sales Fall 2.3% As 'Halo Effect' Fizzles

Microsoft sold fewer Xbox 360 video game consoles during the lucrative holiday shopping season than it did the previous year -- despite September's launch of the blockbuster Xbox 360 title Halo 3.

Microsoft shipped 4.3 million Xbox 360 systems in the three months ended Dec. 31, compared with 4.4 million systems during the same period in 2006-- a decline of 2.3%.

Halo 3 -- a first-person shooter that runs exclusively on the Xbox 360 -- debuted in late September, just before the start of Microsoft's crucial second fiscal quarter. The quarter covers sales made during the key Thanksgiving and Christmas shopping periods.

Halo 3 smashed numerous game industry sales records during the days following its launch. The game racked up sales of $170 million during its first 24 hours on the market and receipts of $300 million during its first week.

It also set new standards for online play. More than 2.7 million gamers played Halo 3 on the Xbox Live online gaming platform in the first week, Microsoft said.

Anticipation around Halo 3 sparked a sharp increase in Xbox 360 sales during Microsoft's first fiscal quarter, which runs from July through September. Sales of the gaming system jumped 100% compared with the previous year as Microsoft shipped 1.8 million consoles during the normally slow period.

But Microsoft's second-quarter report, released Thursday, indicates that Xbox 360 sales have sunk to below pre-Halo 3 levels. The company's Entertainment and Devices Division -- which houses the Xbox and related products and the Zune digital music player -- squeaked out a modest 3% revenue increase to $3.1 billion in the second quarter.

Microsoft said the group's sales of games for Windows and the Xbox 360 increased 5%, but noted that the gain was partly offset by declining Xbox 360 console sales.