Looks like theres a good chance the 360 could actually be in short supply this holiday season if the demand ends up being rather high. Yay I'll finally get to be able to use the shortage execuse that Nintendo and Sony fans used way too many times.

They could just be cautious. Microsoft has slowed down production in Jan-March before and suffered from some shortages. My guess is that they aren't intending to book as much production ahead of time and thus be more conservative. If the Xbox 360 sales continue to do well up to and beyond November when Kinect launches its pretty obvious Microsoft will book some more wafers from the fabs.

Theres no point in their building up too much inventory and there still is the question on whether they will shrink again to 32nm next year which would mean that unsold 45nm Xbox 360 S chips will be a PITA they don't want to manage.

 I agree it looks like they feel they have enough to meet slim /kinetic estimates and  i think your spot on with the 32nm shrink , it would be nice to know Sony's and Nintendo's plans regarding production because if its a full market down turn they should be in the same boat going forward even with different strategys.

I don't doubt the reputation of Barron's nor the veracity of the 40% in cuts claim. But I have to agree with most here regarding the sense it doesn't make. If going by 360 sales through the first quarter of this year and most of the 2nd, I could see the reasoning. But since the release of the Slim, it has been handily beating the PS3 in sales week on week and and even the Wii nearly every week (until most recently). It's has also averaged higher weekly sales since its release in 2005 over the past near 3 months going by any similar time span.  It's also reasonable to think the 360 market is getting saturated. I couldn't give real numbers, but it would be a fair guess to say that the shipments of th 360 since release at well over 42mil according to VGChartz, could be attirbuted to between 15%-20% of repurchasing the console for various factors.

Large inventory stock = large storage costs. There is value to going lean in the manufacturing process so I think that it is sensible that the company does not overstock.

for those saying the cut doesn't makes sense because of current demand and upcoming games has to realises is that this is a cut to the forecasted build numbers, all these factors would have been taken into consideration when the first forecast was made. Add in the fact they were probably expecting a stronger economic recovery helps explain the cuts. The article suggests that the downturn in fab demand may lead to more expensive chips so that could also be a factor as they may not want to manufacture any more units than they absolutely have to to keep up with demand ATM.

Good point.

I'd be curious to see if Nintendo and Sony have the same problem.  It does tell me that Kinect preorders must not be as amazing as many had predicted.

well not as high as they predicted anyway.

I'm pretty sure MS's fourth quarter is Apr-June, which is normally a slow time of the year anyways.