The Xbox 360, which utilizes the Kinect motion-sensor accessory, had its best year of sales in 2011, reports Bloomberg. The console even outsold Sony's Playstation 3 and Nintendo's Wii. This success explains why the company feels that announcing a new console will drastically hurt the steady orders for the current lineup.
Better yet for Microsoft, while many consoles lose money on the sale of consoles, whereby firms hope to make up the losses through game sales, the Xbox console is actually profitable. Microsoft earns roughly $150 per Xbox 360 unit. Microsoft's entertainment division, which includes the Xbox, posted a 45% sales gain to $8.91 billion in the fiscal year that ended in June.
"They're still selling a lot of Xbox 360, and they're making money," said Michael Pachter, an analyst at Wedbush Securities to Bloomberg. "I don't think the world needs them to put a new console out just because we're bored."
The only downside the company foresees is if competitors launch a highly competitive product that's much better than what is out now.
Business section: Investing ideas
Microsoft's strategy is quite opposite of other tech giants, like Apple, that are constantly bringing new models to market and working to maintain hype.
Do you think Microsoft is implementing a smart strategy?
Here are some tools to help you evaluate Microsoft and some gaming competitors. A more detailed list can be found below. Click on any links or icons to access a variety of free tools to help further your analysis.
Press "play" on the Compar-O-Matic to see changes in average analyst recommendation for the companies mentioned below:
Use the Turbo Chart to compare MSFT and SNE against the S&P 500 index.
Use the list below as a starting-off point for your own evaluation. (Click here to access free, interactive tools to analyze these ideas.)
1. Microsoft: Develops, licenses, and supports a range of software products and services for various computing devices worldwide
2. Sony: Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide
3. Activision Blizzard
4. Electronic Arts
5. International Game Technology: Designs, manufactures, and markets electronic gaming equipment and systems worldwide
6. Konami: Develops, publishes, markets, and distributes video game software products for stationary and portable consoles, as well as for use on personal computers
7. Take-Two Interactive
Kapitall's Rebecca Lipman does not own any of the shares mentioned above.
The Motley Fool owns shares of Activision Blizzard, Apple, and Microsoft. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, Take-Two Interactive Software, and Activision Blizzard. Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft.
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