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Microsoft cuts Xbox price, goes after Nintendo

Posted Sep 04 2008, 07:36 AM by Douglas McIntyre
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Microsoft has decided that it would rather be the video game market share leader than make a buck at the business. (Microsoft is the publisher of MSN Money.)

Redmond cut the price of its Xbox 360 to $199. That drops it from its previous sticker of $279. The action may take some business away from the Sony PS3, but it is more clearly aimed at market leader Nintendo which has remained in the front spot for months with its $250 Wii.

According to MarketWatch, "This is a smart move by Microsoft ahead of the holidays, as this makes them the price leader," said Colin Sebastian of Lazard Capital Markets.

There is also a very good chance that the move will put the Microsoft device division back into the red. It struggled for years to make money.

In the fiscal year ending in July, Microsoft made $426 million on $8.1 billion in revenue in the unit it calls "entertainment and devices". It lost a total of $2.3 billion in the operation over the previous two years.

Some of the improvement in revenue at Microsoft's Xbox empire came from games, primarily Halo 3. It is not at all clear that this income can offset such a huge price drop for the Xbox game console.

Microsoft has never been against losing money to weaken competition. With the holidays coming, it has a chance to best it two large rivals.

The move puts Sony in a tough spot. It has been counting on a resurrection of its games division to help improve the company's multi-year lackluster earnings performance.

With cash still pouring from its software operations, Microsoft can afford to wage a price war in the video game market.

Top Stocks contributor Douglas A. McIntyre is an editor at 24/7 Wall St.    

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Comments

 

Wii, Wii, Wii, Wii.  They only lowered the XBOX arcade which no one likes anyway.  What about all of them.. If they do that then I might buy one.

I agree with the poster that said this is not about competing against the Wii.  You cant compare any EA Sports game on the XBox with that on the Wii except maybe Tiger Woods.  The Wii is for fun. The XBox is for competition.  This is about complementing the Wii.  Now folks can buy a Wii AND an XBox 360 for the price of a PS3. That's hard to pass up.

Reading these comments are funny because a lot of ppl have no idea what they are talking about, nor does the article give the whole story. They are dropping the price on the Xbox Arcade Version, which only has 256 megs of memory, and no Hard Drive... As opposed to the regular version that comes with a 20 gig HD for $299. Good luck enjoying Live if you can't download any additional content. A 20 gig hard drive alone runs for $100 for the xbox. They changed the price as a lot of consumers felt ripped as there was only a $20 difference between having no memory and a decent 20gig hd. If for some reason I am wrong, and the 20gig Xbox price is dropping then I'll buy 2, cause $199 would be a solid deal. Especially with announced changes to the Xbox dashboard...

Wow, the uninformed come out with these posts. The red rings of death are pretty much resolved at this point, the $200 system has just as much memory as the Wii with over 3 times the processing power and signifigantly better 3rd party supoort. Microsoft needed to do this.

FOR ANYONE LOOKING TO BUY X360 I WOULD STAY FAR FAR AWAY FROM IT

MY SONS 360 WAS SENT BACK 8 TIMES IN 1 YEAR FOR REPAIR AND IT IS BROKE AGAIN, AND AGAIN THEY SAY SEND IT BACK AND WE WILL REPAIR FOR A MINOR CHARGE, THEY HAVE A GARBAGE PRODUCT AND THATS THE REAL REASON THEY ARE LOWERING THEIR PRICES NOT TO COMPETE JUST TO GET RID OF THE PRODUCT, AND THATS THE TRUTH!!!!

Guess what guys ... I bought my kid an XBOX 360 Elite from Circuit City for almost $ 449. It started scratching my CDs right awa, total 3. Then I went back to Circuit City and got an exchannge, and guess what the new one did? ... Wouldn't even start up...goves me error E68 or something. Technical support told me its the hard drive. And just like a good customer guess what my next move is ... return the XBOX and getan PSP3. I finally had enough.

Some people might think the 360 is useless....but to be honest its the best console out right now and now its even better with an affordable price. SOny sucks, i know ps online is free but its a laggy network. xbox live is 50 bucks a year but its worth it.

Shane- the ring of death is primarely caused by a improper type of soder used in initial production, at flexes of temperature it would become brittle. microsoft has adrresed this problem and all moddels with the improper soder had an enormously extended warenty that would overlap any falure due to it

I think that is smart it helps the whole console wars....Lowering the cost of one console the others should follow suit....I have played all three consoles I love my Wii..... button mashing is so old school I admit that the graphics could be better...For that I have my computer....I WILL NEVER BUY A SONY PRODUCT....I have had sony products but they never stand the test of time and if they break under warranty you send it in and get a bill for what they say is not covered....on a lighter note there is more 3rd party developers making the switch to the Wii platform so more "adult games" will be coming to the Wii....

Ok, i cant care that they lowered the price of the box, ive had mine since launch, its broken once and i had a new one sent back from microsoft. And my xbox was 2 years old.. thats a awesome warranty, ive read through these uneducated posts, and this is what i have to say. Ive played each system i own a wii and a 360, the reason wii is leading the pack is becuase they barely send enough units to satisfy the consumer market which keeps people buying there systems becuase they are hard to find, also it is made to be for the whole family. Xbox is made for the casual-hardcore gamer with titles that sell tons of copies while being at a M rating. PS3 has been lacking in sells, becuase they dont have HDMI Cords out of the box, Their first and third party content has suffered, and the "free online" blows, sorry to say but you cannot compare xbox live (4.50 a month) to PS3 (lagtastic Free service) the online gaming for wii is terrible as well. I like my wii but it doesnt appeal to me with most of its titles, so saying that People that bring up console wars here is a idiot, XBOx is playing the sart move to gain potential college student and young adults that have bills to pay so they can afford the systems, remember M ratings 17+ thats the market they are trying to hit

Wii= Family

X360= 17-40 year olds

PS3= Hardcore japanese game players.

They all win in their respective market and everyone has a choice and opinion to what system they like best i love my 360 becuase i like the games and the incredible online content and i love my wii becuase its a great party sytem i like the ps3 for blu-ray but id never buy one, if i wanted blu-ray id buy a blu-ray player, instead of paying a $100 dollars more for a junk video gaming system that you have to install the games so the load times dont take forever. Oh and the ring of death doesnt happen alot of you know how to take care of your system i.e kipping it cool, open areas not standing it up, and playing for days on end.

Thanks.

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