Microsoft Is Starting to Kinect The Dots

What is with Microsoft (Nasdaq: MSFT  ) getting all kinds of innovative with us recently? I thought they had stopped innovating for good years ago, but it seems that competition brings out the best in everyone. New consumer products at Microsoft over the past decade have mostly been copycat attempts at matching innovative products made by competitors. Anyone ever buy a Zune? Microsoft's answer to Apple's (Nasdaq: AAPL  ) iPod was a disaster. As were attempts at a tablet, as well as quite a few smartphone debacles.

However, last month Microsoft introduced its Windows 7 phone to favorable reviews from smartphone aficionados, and the company's latest gaming innovation -- Kinect -- was released to the masses last night at midnight, with some GameStop (Nasdaq: GME  ) locations holding two-hour countdowns for pre-order customers.

The Kinect
Microsoft hopes Kinect provides a challenge to Nintendo's Wii and Sony's (NYSE: SNE  ) PlayStation Move. The $150 device will be sold at more than 30,000 stores nationwide, including Best Buy (NYSE: BBY  ) , Wal-Mart (NYSE: WMT  ) , and online retailer Amazon (Nasdaq: AMZN  ) . It will begin selling in Europe and Asia later this month.

The difference between Microsoft's new product and similar gaming platforms is that the Kinect does not require users to actually hold anything in their hand to control the game play. Instead, the system includes an infrared sensor, camera, and microphone to read motion and sound to control the gaming experience.

Microsoft is not pushing this product to the hardcore gamers, but instead is producing more accessible and easy-to-play games in hopes of attracting new customers. This is going to be an important determining factor of Kinect's success, as users must have a Microsoft Xbox in order to use the new system.  The Kinect should help the company extend the life of Xbox, which first went on sale in 2005, as well as help transition more users to an updated console in the future.

Microsoft is confident
Microsoft's sales predictions show how confident the company is that the Kinect will be a hit. The company believes it will sell more than 5 million by the end of the year, giving it a little less than two months to achieve what seems like an unrealistic goal. Sony's PlayStation Move was released in September and reached the 1 million mark in North America and Latin America after a month on the market. However, Microsoft's release falls nicely in line with the holiday shopping season. The Nintendo Wii has found its way into more than 65 million homes since the console was released in 2006.

It's been a long time since Microsoft has leaped ahead or one-upped its competition, but it appears it has taken a good shot with Kinect. It seems Microsoft has taken every measure and spent every dollar necessary to make sure this is a success. Microsoft chief research and strategy officer Craig Mundie says that even "the annoying little brother effect" was negated through technology enhancements that prevent other movements near the system from playing havoc with the game.

More than just a game
For Microsoft the hope is that Kinect becomes more than just a gaming system. The company hopes this is the first step in creating an interactive home device that will allow people to control all household technology through a Microsoft-based voice and motion sensor. Whether it's turning on and off the lights, making a phone call, changing the TV channel, or opening the garage door, Microsoft hopes Kinect can make this connection a reality with just this device.

The idea has been extremely costly in terms of development and marketing, but it has also shown a more ambitious and riskier side to Microsoft that investors have been salivating for. There will certainly be commentary over the next few weeks from techies who think Kinect is too clunky or hard to use, and they may be right. However, for once Microsoft is taking chances, and offering innovation that surpasses its competition. For a long time that was too much to ask from the Bret Favre of the technology sector. But it seems the times they are a-changing again.

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Andrew Bond owns no shares in the companies listed. Amazon.com and Apple are Motley Fool Stock Advisor selections. Microsoft and Wal-Mart Stores are Motley Fool Inside Value picks. Motley Fool Options has recommended a diagonal call position on Microsoft. Motley Fool Options has recommended writing covered calls on GameStop. The Fool owns shares of Apple, Microsoft, and Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. The Fool has a disclosure policy.


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  • Report this Comment On November 04, 2010, at 8:27 PM, hionvcsy1 wrote:

    If only Microsoft didn't have everyone blinded, then you would actually be able to see that it is VCSY's patents that have allowed Microsoft to move forward since settling with VCSY on July 25, 2008 with a confidential settlement agreement.

    Pursuant to the confidential settlement agreement, the Company has granted to Microsoft a non-exclusive, fully paid-up license under the patent which was the subject of the legal proceeding.

    http://www.sec.gov/Archives/edgar/data/1099509/0001144204080...

  • Report this Comment On November 05, 2010, at 12:24 AM, dileepkrp wrote:

    Sure. Who gives a damn about some VCSY cr*p.. Kinect is great!

  • Report this Comment On November 05, 2010, at 10:03 AM, nmoore41 wrote:

    VCSY's patent was a "system and method for generating Web sites in an arbitrary object framework."

    That has nothing to do with Kinect.

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