Analyst: Software, Hardware Fortunes To Trade Places In September NPD Results

When the NPD Group reports September's U.S. industry retail sales this Thursday, don't look for a reversal in declines, warns Kaufman Bros. analyst Todd Mitchell, who forecasts revenues down 8 percent to $1.175 billion. But the trend that's seen software down alongside growing hardware can be expected to change, he predicts. The launch of Microsoft's Halo: Reach and Electronic Arts' FIFA 11 should push software retail sales toward a positive trend, he says. Conversely, challenging comparisons for the PlayStation 3, a "pull-back" in Wii hardware and "continued erosion of the handheld market" will combine to create hardware declines. Microsoft has revealed Halo: Reach hit $200 million in sales on the first day of its September 14 launch -- this puts it up against last year's release of Halo: ODST, whose 1.5 million day-one units were "somewhat disappointing", according to Mitchell. And although FIFA 11 will likely show better performance in Europe than the U.S., EA has been representing its September 28 opening weekend as "strong", the analyst says, expecting it'll combine with Halo: Reach to create software sales growth. And that's excluding the PC revenue from Civilization V, which "likely sold well during the month." "We are projecting September 2010 software sales of $677 million, a 4 percent increase from $649 million a year ago, and a 27 percent drop in hardware sales to $346 million, with accessory sales off 3 percent to $152 million," forecasts Mitchell. As for the hardware space, Sony will face a September challenge, as it's the month last year it launched its long-anticipated, price-reduced PS3 Slim. That move led to a 500,000-unit surge in PS3 sales, a performance Sony will be hard-pressed to approach a year later. "This September, we anticipate PS3 sales will drop 33 percent to 330,000 units," says Mitchell. This leaves room for Xbox 360 to lead September, still on a good kick from June's slimlining and price reduction and bolstered by Halo: Reach. Mitchell expects a 40 percent increase for the month to 495,000 units. Attrition is expected to continue on Nintendo platforms, however: "We expect a 35 percent drop in Wii sales to 300,000 units as well as continued erosion of the handheld market with a 42 percent drop in PSP sales to 110,000 units and a 19 percent decrease in DS sales to 425,000 units," concludes Mitchell.