Microsoft announced at the end of last week that it would adjust orders on components for the XBOX console due to lower than expected sales of the gaming machine. That not a big announcement for a software company from Redmond, Washington, but it is a very important information for numerous companies who provide Microsoft hardware for their XBOX.

I remind you that Intel supplies the software giant its special Celeron processor, NVIDIA sells Microsoft its XGPU+MCP-X chipset, Seagate and WD provide HDDs, Focus Enhancements makes TV encoders for Microsoft and a lot more companies supply DVD-ROMs, cases, joysticks, cables, mainboards and other components for the console that Microsoft sells for $200, approximately $100 to $150 less than it really costs. NVIDIA alone makes tens of millions every quarter selling the XBOX core-logic set, other suppliers should also earn significant amount of money doing business with Microsoft.

Last week Microsoft told all its suppliers to adjust the inventory for the XBOX, as the Redmond-based developer is not sure that the demand on the console will be high enough. Some analysts believe that Microsoft had over-ordered the components for their entertainment device and now simply cannot sell all the stuff, however, it is not very likely that Microsoft had been buying more components than it really needed, as they loose money on every unit they sell. According to an official from Focus Enhancements, software giant's component requirements for the first half of 2003 had been reduced.

Note that there are still not a lot of games for the XBOX available compared to PlayStation2 console. In case the market demand is almost fulfilled with the consoles, it may become that sales of the XBOX in general will also be slow even in the second half.