Microsoft Working on Kinect 2 with Advanced Features, TV Integration

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Microsoft (NASDAQ:MSFT) is working on the next version of the Kinect motion gaming add-on, which it sells along with its Xbox 360 console. It will offer improved motion sensing and voice recognition capabilities, and will also pack in enough processing power to lip read and gauge emotions of players based on their pitch, volume and facial characteristics. [1] It will likely be launched with the next version of the Xbox, which is expected in 2013. Microsoft’s Xbox and Kinect compete primarily with the Sony (NYSE:SNE) Playstation 3 and the Nintendo Wii. Microsoft currently has around 18.5% share in the gaming console market. We expect it to increase to around 27% by the end of the forecast period.

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Microsoft Planning to Integrate Kinect with TVs

Rumors suggest that Microsoft is also planning to bring Kinect to TVs, and is in talks with TV manufacturers like Sony and Vizio. [2] Reportedly, Microsoft is also looking to launch a cheap variant of the next Xbox, which will be integrated with Kinect and aimed at casual gamers and act primarily as a set top box. There will also be a pro-version of the next Xbox, which will be targeted at the hardcore gamers and will pack in a lot more power. Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) also have their TV based products, and Apple is reportedly planning to enter the TV market next year with a full-blown TV offering.

The Kinect was launched around a year ago, and has been a runaway hit. It boosted sales of the Xbox and generated a significant amount of revenue for Microsoft’s Entertainment and Devices division which grew the most last year. Microsoft recently announced that it would launch Kinect for Windows 8, and also launched a new Kinect based startup accelerator to encourage developers to build Kinect apps.

Xbox, Kinect, Zune and other devices account for nearly 8% of Microsoft’s $32 Trefis price estimate, which stands nearly 25% above its current market price.

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Notes:
  1. Kinect 2 so accurate it can lip read, Eurogamer []
  2. Microsoft plans to spread Kinect into more living rooms, The Daily []