"You'll be able to see who's gaining traction and losing traction," said Michael Pachter, analyst at Wedbush Morgan Securities. However, Pachter predicted that the 2008 holidays will be even more competitive if the Wii is in better supply and if prices of all three consoles drop further.

The Wii, which sells for $250 and features a motion-sensitive controller, sold 13.2 million units worldwide as of September, Nintendo said. Microsoft reported that the Xbox 360 -- in models priced from $280 to $450 -- had sold 13.4 million units at the time. Then, in October, U.S. sales of the Wii exceeded Xbox 360 sales, according to the NPD Group. Combined with the Nintendo console's strength in the Japanese market, that effectively would bring the two into a dead heat in cumulative sales.

The PlayStation 3, which sells for $400 and $500, has sold 5.6 million units worldwide, a company spokesman said. Sony's PlayStation 2 dominated the previous console generation.

In addition, people everywhere will be seeing yellow as The Simpsons takes Xbox 360 by storm later this summer in advance of the famous Springfield family's big-screen debut on July 27, 2007. Xbox 360 is partnering with FOX to help promote The Simpsons Movie, offering fans the chance to get their hands on one of 100 limited-edition "Simpsons" Xbox 360 Pro consoles through a series of special events and promotions. For anyone who is drooling like Homer about how to win, more details will be available at http://www.xbox.com.

In the first incarnation, games developed using the free tools will be available only to like-minded hobbyists, not the Xbox community as a whole. Those who want to develop games will have to pay a $99 fee to be part of a "Creators' Club," a name that is likely to change. Games developed using XNA Game Studio Express will be playable only by others who are part of the club.

Next spring, Microsoft hopes to have a broader set of tools that will allow for games to be created that can then be sold online through Microsoft's Xbox Live Arcade. Microsoft will still control which games get published, and it'll get a cut of the revenue.

Down the road, probably three to five years from now, Microsoft hopes to have an open approach, where anyone can publish games, and community response helps separate the hits from the flops.

That would mark a major shift in the gaming world. While people have long been able to create their own PC software, console game titles have historically been created by a far more limited set of developers.

The new CPU will be built using technology that can reduce heat and power consumption, as well as potentially increasing speed. It will also help Microsoft cut the console's cost.

The improved Xbox 360 CPU will be manufactured using 65 nanometre technology starting in the first quarter of 2007, Chartered Semiconductor of Singapore said. The existing CPU uses 90nm technology.

Although the launch of the Xbox 360 last November was generally hailed as a success for Microsoft, the console has been troubled by reports of overheating causing games to crash or freeze.

These have come despite the unit using a pair of powerful fans, together with heat pipes, to carry heat away from the CPU core.

"In every other generation, the first guy to 10 million consoles was the number one seller in the generation," Ballmer told FORTUNE in an interview on Thursday afternoon. "Did we just get an even better opportunity to be the first guy to 10 million? Yeah, of course we did."

But Microsoft will not formally revise its projected market share for the Xbox 360, and it will not speed up production to capitalize on Sony's delay, because it's already producing the Xbox as fast as possible. "We've been saying 'make them faster' before yesterday," says Ballmer.

When the Xbox 360 launched last holiday season, Microsoft had its own missteps. Shortages led to sales of only 600,000 systems from the debut on November 22 through December 31, far fewer than Microsoft and market analysts expected.

There is still a production bottleneck because of problems with a component vendor, whom Ballmer declined to name, but he expects Microsoft to sell 5 million systems by June. "We're sort-of on track," he says, "though it would've been nice at Christmas to have one for everyone who wanted one."

"Now we're starting to cook. We're building a vibrant, rich and profitable business model for the future," Moore said.

He admitted that the problems were also caused in part by the fact that the console launched in North America, Europe and Japan almost simultaneously, but said while this strategy was controversial, "It was the right decision."

"It's what we needed to do to bring next-gen gaming to a global audience. There have been short-term shortages, but we're driving a clear advantage as we go forward," Moore said.

He went on to highlight the success of the Xbox Live service, stating that more than four million pieces of content have been downloaded since launch. While only 10 per cent of original Xbox owners have used the service, 54 per cent of Xbox 360 owners have connected to Xbox Live - and Microsoft intends to "maintain that all the way through Xbox 360's life cycle."

Ballmer commented to the Citizen: "In these new consumer electronics devices based on new chips, there's always the question of what yield will you get out of the manufacturing process of the new chip. We're getting a little less, but not much less than the yields we expected, and we know that the yields we expected will probably outrun supply."

However, Ballmer noted: "We decided to go ahead and launch rather than wait until post-Christmas and get a few million units out into the hands of users. We're doing our best."

In addition, in remarks at a technology executive conference reported by Reuters, Ballmer quipped, in an apparent attempt to defuse some of the frustration over limited stocks of Microsoft's next-gen console: "The Ballmer children do not have their Xbox 360 yet. I'm in the same boat as many of you. Thanks to the wonders of [financial regulation act] Sarbanes-Oxley, management does not get a free Xbox 360."

But those who actually got the system in hand are breathing easy and living it up, right?

Some of them are. But others are posting a plethoral of problems with their brand-new 360s, from game crashes to hard drives that simply don't work.

One reasonable gamer lays it out like this: "Between my friends and I, we bought six machines at the Zero Hour event. Of the six, my machine has a dead hard drive, another machine is working but is rather flaky (seen some strange behavior-the drive may also be scratching discs, as my friend's copy of Condemned is now unplayably scratched, but we don't know if the drive caused it-the machine has also had problems booting games and being turned off...), one seems to be good, and I haven't heard yet about the status of the other three."

A fraction of the Xbox 360's that are being sold have problems which could cause graphical errors, freezing or even corruption of the Xbox's drive. Some of the consoles are uncapable of playing any games, and just shut off or show graphical messes when they are used.

Microsoft's report said that these bugs are in a "very minor fraction" of the Xbox's sold. Microsoft expects to have sold up to 3 million Xbox 360's before the end of the year, while Sony doesn't intend on releasing their Playstation 3 for almost another year.

"We are making sure that the people that are having problems are getting their issues resolved quickly," said a spokesperson from Microsoft’s Xbox department.

But many gamers were furious that they didn't get their Xbox 360s this week, despite preordering months in advance or waiting in line outside stores all night. And a small but very vocal percentage of new owners are flooding gaming websites with reports of overheating hardware and crashing consoles.

Few things suck more than getting your new toy home and finding out it's already broken. But every recent console launch has been plagued with technical problems - disc read errors on the Xbox, overheating circuit boards on the PS2, random resets on the Dreamcast and original PlayStations that would only work properly while upside down.

Microsoft claims the Xbox 360 failure rate is on par with any other piece of complex consumer electronics, but since we don't have access to their figures, we have no way to tell.

Whatever the case, the company is offering free repairs or replacements to those whose issues can't be resolved with a call to customer support at 1-800-4MY-XBOX.

They gathered in the rain in Manhattan, where a Best Buy opened its doors at midnight. They stood in line all night at chain stores like Target.

Mr. La, a car salesman in San Francisco, had preordered one Xbox 360 from a local EB Games store, which he picked up at midnight. Then he waited in line to buy a second one at a nearby CompUSA store, after deciding not to wait at the Target.

He said he was hoping that stores would sell out of their initial supplies and he could make a profit selling his second machine.

"I think I can get at least $800 for it," Mr. La said of the system, which costs $399 in stores.

The final shipment of the US Consoles on the 22nd is 1,098,200.

Microsoft plans on selling 4 million 360's within the next 5 months worldwide.

There are currently 2,190,876 accesories being shipped on the 22nd to the US

There are currently 29 Games that will be available BEFORE the end of the 2005

There are current plans for sequels to NEW franchises that arent even out on the 360 yet.

Microsoft plan on expanding there Xbox Live user base to 14 million users by the end of the 360 lifespan.

What's really intriguing about this (other than we now have a numerical value for how many people are going to be riding the short bus home from Best Buy) is the number of accessories. How many accessories do YOU want for your 360? At minimum I'm buying an extra controller, a Charge and Play pack, and two rechargeable batteries. That's four.

What's two million divided by one million? Two. Is four more than two? Yes.

The rumors, apparently, are true. According to retailers in San Francisco, Chicago, New York, Miami and Houston, there will be mass shortage of Xbox 360 units on the targeted launch date of November 22. IGN contacted dozens of stores around the country, including Gamestop, EB Games, Electronics Boutique, Target and Walmart. One short-tempered clerk at a Gamestop in New York estimated that Xbox 360 units will not be available for walk-in customers until April. That's right, April.

April is obviously the worst-case scenario, but every retailer we spoke with that accepted preorders estimated that walk-in customers will have to wait until January for their new system. And since none of those retailers are accepting any more preorders, there may be a lot of disappointed little gamers this Christmas.