Sales of Microsoft's Xbox 360 will fall towards the end of this year as gamers wait for the release of competing products from Sony and Nintendo, according to one of the principal manufacturers of the Microsoft game console. 

Confidential documents seen by vnunet.com reveal that Taiwan-based Wistron, one of three primary Xbox 360 manufacturers under contract to Microsoft, expects its shipments of the console to slow in the third quarter and adversely affect revenues. 

Wistron privately expressed its concerns over an Xbox 360 sales dip to financial analysts in Taipei, who have disseminated them in briefings to their clients.

The size of the potential shortfall was not disclosed, but the manufacturer still expects its overall sales revenue to rise thanks to product lines other than the Xbox.

As a storm of marketing hype builds up prior to the release of Sony's PlayStation 3 and Nintendo's Wii, consumers will begin delaying console purchases to compare the competing products. 

Simultaneously, the same sources have suggested that Microsoft is planning Xbox 360 price cuts to undercut the newcomers.

Even committed Xbox buyers are likely to delay purchases if they believe price cuts are imminent. Sony's PS3 will be considerably more expensive than the Xbox 360, analysts say, while Nintendo claims that the Wii will be significantly cheaper.

In addition, more knowledgeable gamers are awaiting a revision of the Xbox, including a CPU upgrade which is expected to resolve overheating issues and help Microsoft cut costs.

Singapore-based Chartered Semiconductor, which makes the Xbox CPU, announced in April that consoles using the new CPUs would be ready by early 2007. 

Despite the expected dip in Xbox 360 sales, Wistron is positive about its prospects for the third quarter.

Executives are looking for an increase in sales of close to 15 per cent over the previous quarter, in which Wistron generated almost $1.5bn. Analysts generally agree with these guidelines.

The giant contract manufacturer, which is affiliated with Taiwan's Acer Group, builds a wide range of computing and consumer electronics products for brand name vendors at a network of factories and assembly plants worldwide. 

Wistron rarely comments publicly on details of its relationships with specific clients. The company did not reply to a request for comment on its Xbox 360 sales forecasts.