Microsoft's Xbox has so far failed to capture the hearts and minds of the gaming community.

According to The Independent newspaper, analysts are reporting that the software giant has been seeing poor sales in Japan, Europe and the US, coming a clear second to Sony's PlayStation 2.

Sales have been so poor that Microsoft may be forced to slash the £299 price tag, which is over £100 more expensive than Sony's device.

While the company claims that there is "strong demand" in Europe it admitted that there were no stock shortages.

A Deutsche Bank analyst was reported as saying: "While Xbox had been projected to struggle because of inadequate software and poor brand recognition, the setback is worse than imagined."

Sony has proved to be a tough customer to compete with as it has years of experience pitching its products in a sector unfamiliar to Microsoft.