Microsoft Corp. (NASDAQ: MSFT) has been a magic stock in 2013, despite the woes of Windows 8. A new update is going to fix many of the missteps of the new operating system. And with a new video game console refresh coming via the Xbox One (really the Xbox 3), we cannot help but wonder if Microsoft’s high $499 price for the console ultimately will hurt PC sales and Windows 8 sales.
On the surface it might seem like a stretch that a video game console could disrupt PC operating system sales. You have to look beyond the surface here. One thing that has happened is declining PC sales, and some of the decline was tied to a complicated and unfamiliar Windows 8 operating system that was so different from other operating system launches. There was not even a “Start Button,” which Windows users have grown used to.
Most video game consoles sell for $399 or even less, yet Microsoft wants $499 for the console refresh. It is true that the Xbox One will act as a media and communications center for your living room for games, movies, music, TV programming, pictures, communication and the Web, so it goes well above and beyond prior video game systems. It interacts with all forms of devices as well. The problem is that this may be one more excuse for consumers to delay buying a replacement, bulky desktop or a laptop PC.
The trend into tablets has acted as a serious PC-sales killer. Apple Inc. (NASDAQ: AAPL) created this sector, and the tablet sales have been so good that even Mac sales arguably have been hurt. If consumers can spend $399 or $499, they are less likely to go out and spend $799 or even well over $1,000 on a new PC.
Another issue is that the $499 price for the Xbox One may open the door for Sony Corp. (NYSE: SNE) to win market share. The PS4 gaming system also launches later this year, but at a price of $399. Sony’s policy toward used games is also clear and consumer-friendly, and it will not require an Internet connection. Both issues and features have been less clear from Microsoft for the Xbox 360.
This argument, or thought, that the Xbox One could hurt Windows 8 and PC sales boils down to price and available money. A $499 price tag for the Xbox One likely is not high enough that dedicated gamers and those addicted to home entertainment will fail to buy the system. The flip side is that the price tag is high enough that consumer electronics consumers may have yet another reason to delay updating their desktops or laptops. That leads to fewer Windows 8 sales.
It will be interesting to see if Hewlett-Packard Co. (NYSE: HPQ) and Dell Inc. (NASDAQ: DELL) will say in late 2013, or early in 2014 after the holiday season, that the new video game consoles were one of the top issues acting as a drag on PC sales. What if it leads to lower PC processor sales for Intel Corp. (NASDAQ: INTC) as well? After all, there is always some reason that PC sales projections keep going lower.
Microsoft shares may be down 1.6% at $34.90 in early Tuesday trading, but keep in mind that its shares are up a whopping 32% so far in 2013.
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