Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE) are doing all they can to win the 2013 edition of the video game console wars. One analysts believes Mr. Softy may have done enough to overcome early missteps, calling the Xbox One a winner for the holidays.
The next-generation console painted itself into a corner early on as Microsoft outlined some downright draconian content policies. Sony's PlayStation 4 is comparable in every way that matters, but it also comes without restrictive content licenses and costs $100 less than the $499 Xbox One. It looked like game over in the first round.
But Microsoft quickly apologized for its heavy hand over what gamers can and can't do with their Xbox One games, and it ended up removing most of the unpopular restrictions. The console is still more expensive than the Sony product, but maybe that's not enough to hold the product back anymore.
Analyst firm Robert W. Baird says the Xbox is on a winning track. Analyst Colin Sebastian ran checks against the supply chains of both consoles and came away with a dramatic conclusion: "Microsoft may have the benefit of a 2-3x unit advantage at launch compared to Sony's PS4."
That's not a small victory, but a savage rout. If Sebastian's sources are on the money, Microsoft will most definitely win this round of the console wars.
Well, Redmond will take the early battles, anyway. Both systems are expected to launch into heavy demand, with manufacturing capacity becoming the limiting factor at first. In other words, Sony might still rule the roost when it comes to public opinion and the potential for long-term success. But Microsoft shows mastery of the supply chain game at this point -- secure more components, build more units, and look good in the early sales statistics.
The real takeaway from this unexpected win is this: Microsoft is serious about hardware.
We all know Microsoft as a software giant, built on decades of success via Windows and the Office suite. That's how Bill Gates got his Dow Jones (DJINDICES:^DJI) membership card, and these are still the core operations of a market giant with a $266 billion market cap and $78 billion in 2012 sales. But that's changing fast.
The recent and ongoing reorganization into a "devices and services" company is for real. Redmond is beating hardware specialist Sony at its own manufacturing game. The feat is even more impressive when you consider that most of a modern game console's parts are made somewhere in Southeast Asia. Sony has these sources right in its extended backyard, and Microsoft is still slapping its hand away with authority.
There's still a lot more to say and do before the cows come home, but Microsoft may be onto something good with the new hardware focus. The lessons learned in building consoles might even translate into smartphone and tablet success somewhere down the road. Maybe that's how Microsoft will earn its keep as a Dow member over the next decade.
The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
Does a Strong Start Make 2018 a Sure Winner for Stocks?
Find out whether the so-called "January effect" is real.
Meet the 2018 Dogs of the Dow
Learn the basics of this simple dividend-investing strategy.
The Dow's Worst Day in 2017
Even with big gains, there were some scary times for the average.