Speculation about Microsoft Xbox price cut on Tuesday

March 27, 2004

Tony
Gikas, analyst for Piper Jaffray, is guessing Microsoft will drop
the price of the Xbox game console to $ 149 next Tuesday morning. This
is in an effort to generate some short term sales increases in retail stores. However, he also is somewhat pessimistic about the strategy being effective long term. He says that's still $ 20 above where the Xbox price needs to be in order to build sales momentum and boost the console's user base.

"Xbox management must be under pressure to
limit losses on its Xbox hardware system," he wrote. "We think the $ 149
price point is a risky undertaking that will limit unit sales without
additional promotions or killer applications to drive interest. We had
been expecting the $ 129 price point to drive hardware and ultimately
software sales during the next 12 months. We doubt a $ 149 price point
will be enough to drive (2004) hardware unit sales above 2003 levels."

Microsoft executives have refused to comment on this
prediction, even when asked at the Game Developers Conference in San Jose,
California held this week. Some had speculated the price move would be announced
at that time. So we will have to wait and seee what happens after this weekend. All they will say is pricing is not driven by profitability. They are looking at the business quarterly and asking themselves where do they want the installed user base to be. It is more of an investment.

Source: C|Net