Microsoft's Xbox 360 appeared to be sold out in most locations around the country, just a day af... Stores sell out of Xboxes -

The sellouts left a number of shoppers frustrated that they weren't able to get their hands on the scarce systems. In many cases, stores gave vouchers to people who waited overnight, and those lucky customers were the only ones able to get machines Tuesday.

Felix Dalldorf, a 49-year-old San Jose resident, found out the hard way that showing up when a store opens doesn't guarantee a console. He went to the Wal-Mart store on Monterey Highway when it opened, only to discover all the machines were sold out to people with vouchers. Now he's staking out stores to find out when they get replacements.

Microsoft asked shoppers to be patient. Molly O'Donnell, a spokeswoman for the Redmond, Wash., company said Wednesday it is trying hard to replenish supplies on a weekly basis but could not say if there were any units left on store shelves now.

Some reports surfaced on gaming Web sites such as Team Xbox that the consoles can overheat easily. O'Donnell said there were ``isolated reports'' of overheating. She said the overall number of reports of systems having technical difficulties was no different from the launch of any popular consumer electronics product.

Also, a market research firm bought an Xbox 360 via eBay and tore it apart to inspect the components. Chris Crotty, an analyst at iSuppli, said the firm concluded that Microsoft is spending about $553 for all the parts and assembly on each Xbox 360. That means the company is losing $154 on each $399 console, not counting marketing costs. Microsoft lost an estimated $125 on each of the original Xbox, based on similar ``tear down'' surveys in 2001. Another market researcher, Portelligent, estimated the cost of the $299 version of the console, which lacks the hard disk drive present in the $399 version, cost about $310 to make.

That means the pressure is on to sell more games and accessories for the Xbox 360 in order to turn a profit. Video game console makers traditionally embrace a ``razor and razor blades'' model, in which companies lose money on the razor and make money on the blades. Microsoft, which has invested billions into the Xbox 360, makes $7 to $8 on games produced by other game publishers, and makes considerably more money on the games it publishes itself. Most games cost about $60.

Microsoft's plan is to sell a lot of games, then cut the costs on the console by periodically redesigning it to use fewer and cheaper components. Crotty estimated Microsoft can cut $50 off the cost simply by improving the manufacturing yield, or the number of working chips in every batch produced.

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