) recently announced that over 8 million Kinect sensors were sold
within 60 days of its launch in November 2010 making 2010 the
biggest year in XBox history. Microsoft sold around 1.9
million XBox 360 consoles in December 2010 alone, according to NPD,
a market research company. Microsoft, which competes with Nintendo
) and Sony (
) in the video gaming console market, is expected to continue its
strong sales in 2011.
Although these are encouraging signs for Microsoft, it may not
have much impact to our estimate for Microsoft stock now. We have
discussed before that XBox constitutes very little to our estimate
for Microsoft stock and that Kinect's encouraging sales would not
have much impact on its stock value (See
Can the Kinect Move Microsoft stock?
However, in the medium term the Kinect could help reshape the
Xbox living room experience from a gaming focused one to more
general entertainment such as watching movies, online TV and
interacting with friends. We have a
$31.56 Trefis price estimate for Microsoft
, which is about 12% above the current market price.
Can Kinect create new revenue generation
Kinect motion technology allows gamers to play by simply moving
their bodies with no need for a physical controller. As
mentioned above, better than expected Kinect sales would not have
much impact, as XBox constitutes less than 3% of our estimate for
Microsoft stock. Microsoft is expected to grow its market share of
the gaming console market courtesy of Kinect. We expect its market
share to increase from around 12% in 2009 to 17% in 2010, followed
by a slower market share gain in the future.
However, Microsoft is planning to leverage Kinect technology for
the living room beyond gaming. Microsoft announced that Xbox LIVE
Gold subscribers will be able to use Kinect to control Netflix (
) on Xbox. This means that viewers will be able to pause,
rewind, and fast-forward streaming movies with only their voice or
gestures. The company also announced that Hulu Plus will be coming
to Xbox LIVE as a Kinect-enabled experience through which viewers
will be able to watch TV shows.
This would reduce the need for controllers and keyboards in the
living room and create a much nice user experience. In the future,
Microsoft could also license Kinect software to TVs and cable
set-top box makers just like Google (
) embeds its Android software in TVs to come out with Google
TV. In this way, Kinect can help speed up the migration of Internet
to the TV set.
The Avatar Kinect uses cameras and motion sensor technology to
allow users to bring avatars to life and interact with friends in
virtual environments. The company revealed this at the Consumer
Electronics Show (CES) in Las Vegas as a potential way to expand
the social experience using Kinect.
If Microsoft further explores these enhanced uses of Kinect
technology, it could lead to new revenue opportunities for
Microsoft as well as higher sales of the Kinect and Xbox.
You can see the complete $31.56 Trefis Price
estimate for Microsoft stock here