According to Sterne, Agee & Leach Microsoft (Nasdaq: MSFT) will announce a price cut of $50 ahead of next month’s E3 Media and Business Summit on its Xbox 360 Pro console that currently retails for $349.99.
Provided Microsoft cuts prices, firm would expect similar price cuts across the other Xbox models later in the year.
In May of this year Microsoft made some noise about the Xbox 360’s sales numbers, saying it was the first of this generation of consoles to top 10M sales in the US. This was well ahead of the Wii at the time with 8.8M, and the PS3, which had under half the 360’s installed base at 4.1M units sold. Worldwide, Microsoft said it moved 19M consoles total, and that 12 million people had signed up for Xbox Live.
Fast-forward this week, Amazon US has been flogging the Xbox 360 Elite for $25 less, down to $425. Meanwhile, there are also rumors that come this July 6th: Kmart too, may lower the console price by as much as $50.
If Xbox 360 Elite – Amazon price-cut is non-coincidental and Microsoft indeed goes through lowering the Xbox price, than Sony (NYSE: SNE) would likely follow suit with a price cut on the Playstation 3. Firm feels this would be a positive for the industry as a whole and for retailer GameStop (NYSE: GME) in particular.
Furthermore, Wedbush Morgan Securities analyst, Michael Pachter, says that a cut now makes a lot of sense, especially since Sony has said it doesn’t want to lose any more money than it already is on the PS3 hardware for the coming year. After all, the PS3 has cost the company over $3 billion in losses to date.
Microsoft has always been a price taker and they typically wait for Sony to cut first. However, they haven’t been in the position of having a cost advantage before, as they do now. Putting Microsoft’s cost advantage together with Sony’s reticence to lose more money, it’s easy to conclude that you will see Microsoft reverse course and be a price leader.
