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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

 

When will Microsoft start sending rebate/refund checks to all that have bought the 360 at original cost?

WHAT HAPPENED IN 360 SINGLE SHOOTER ACTION GAMES ? MILITARY GAMES

ARE THE GOEN FOR ROBOTS AN KIDY GAMES ?

1up is misleading.  There is a price cut for all three SKU's and the xbox live service is $50 for a year + 1 month.  Cheaper if you wait for a sale.

For those who complian about the price of the PS3, consider what you are getting. A high defintion gaming unit with a built in Blu-Ray player. Blu-Ray players themseleves gor for $300-400 each. It is a bit pricey for a gaming system but well worth it for those who have a 1080P TV.

Where are all the people that usually complain when a company like Microsoft sell things below cost and raise the spectre of predatory pricing?  I hope they start to realize that it doesn't hurt consumers and that its not a strategy that works often for the company that tries it. It certainly won't work here- Microsoft could have 99% of the market share if they priced the Xbox at $1, but they're not going to be making any money.

Why would you deserve a rebate Shar?  Maybe instead of buying your precious little snowflake four hundred dollars in videogame equiptment, which he will no dought sell in a year for beer, you should have been a little wiser in your choice.

To 1up: Xbox Live is $50/year, not $50/month.

My 360 got the Red Ring of Death about a year after I bought it. I called Microsoft and they sent me a box to put the 360 in, paid for shipping, and had another one to me in 3 weeks. It has been about 2 years since then and I have had no problems.

The $200 price tag is just a marketing tool to generate hype. People will go to the store excited to buy a 360 for $200, realize it doesn't have the necessary features, and end up buying the higher-end unit. The ones who do buy the lower-end unit will contribute to getting rid of them, which is also what Microsoft wants.

I doubt the price cut has much to do with the Wii. The target market of the Wii is very different from that of the 360. While Microsoft might steal a small amount of business from Nintendo, most people who enjoy Wii Sports don't play Gears of War. Would you buy the Telletubbies DVD Collector's Set if the price dropped to $1?

hey 1up, you might wanna do some research.  Xbox live is $50 a YEAR not a month.  Its also WAY better and more realiable than the playstation network.  I should know, cause I have all 3 systems, and the Wii is collecting dust, and I use the ps3 for the blu-ray player.  The 360 is the only system I play games on all the time.

wont matter, wii will still take microsofts face, and wipe its ass with it. just face it, microsoft is fated to go the dreamcast way. hell, you get better graphics from a pc than 360, yet 360 is supposed to be superior in graphics, if that tells you anything. so, microsoft. go home, you've lost this fight. dont bother trying anymore

very smart comment there Michael D...useless....is what you are without knowing the facts. its not about the price cut.

as far as the red ring goes....i got it, i called them,

its replaced....easy as that......just ask me. its been done SEVERAL times for myself and SEVERAL friends.

as far as sony and their "ps of &^%$" , well they need to stick to making games, stereos, and TV's,  not  game hardware, and wii, well, is nintendo, enough said. for years before the ps1 was even a thought, they were #1. ive had every system theyve sold, and they have alll been nintendo quality, nothing more expected.

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