) recently announced that it will start selling its Xbox 360 gaming
console equipped with the new Kinect motion sensor starting in
November 2010. Microsoft hopes to sell three million Xbox 360 units
in the first two months after the launch . Microsoft competes
with Nintendo (
) and Sony (
) in the video gaming console market.
Kinetic motion technology allows gamers to play by simply moving
their bodies, with no need for a physical controller. We think
innovative technology like this could boost the declining video
game market. The success of games like the "Halo" series should
also help Microsoft gain market share. That said, the Xbox
franchise constitutes a negligible portion of Microsoft's value, so
we don't expect these trends to have significant impact on the
stock. Our analysis follows below.
The decline of gaming
The U.S. video game market has slumped in recent years. Sales of
games and associated hardware (including gaming consoles) fell from
$21.4 billion in 2008 to $19.7 billion in 2009. In unit terms,
worldwide console sales declined from around 98 million units in
2008 to around 89 million in 2009 .
We expect the gaming market to grow in coming years as the three
big gaming hardware vendors introduce new features to their
consoles. Sony plans to add a rival motion sensing technology
called Move to its Play Station 3 gaming console. Nintendo has
developed a new version of its DS handheld device that allows users
to play 3-D games without special glasses. You can drag the
trend-line in the chart above to create your own worldwide console
market forecast and see how it impacts Microsoft's estimated share
Popular video games can do a lot to drive console sales.
Microsoft, for example, has benefited from the huge success of the
"Halo" series. After the resounding success of Halo 3, the new Halo
Reach racked up $200 million in global sales on the day of its
launch . Going forward, we expect Halo and other hot games will
help Microsoft boost its share of the console market. In the next
interactive chart you can drag the trend-line to create your own
console market share and associated stock price forecast for
But it won't move Microsoft's stock
Xbox and Zune together constitute around 1% of our stock price
estimate for Microsoft. Hence any upside to our forecast for
Microsoft's Xbox share or the overall size of the console market
will have negligible impact on the stock.
You can see
the complete $28 Trefis Price estimate for
Microsoft's stock here.
Wall Street Journal: Microsoft bullish on
Video Gaming Console market
Reuters: Microsoft "Halo: Reach" sales hit $200 million on