Microsoft Gains on Xbox & Kinect Sales During Holiday

MSFT: Microsoft logo

According to Microsoft (NASDAQ:MSFT), around 960,000 Xbox 360 consoles and around 750,000 Kinect units were sold in the week of Black Friday. [1] It was officially the biggest sales week in the history of Xbox, which has been the fastest growing business of Microsoft in the last couple of quarters. Microsoft is one of the largest gaming console manufacturers with Xbox 360, which competes primarily with Sony’s (NYSE:SNE) Playstation 3 and Nintendo’s Wii.

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Xbox 360 has been a huge hit, selling millions of units worldwide. Microsoft launched the Kinect gaming add-on almost a year ago and it has seen excellent unit sales, which has also boosted the Xbox 360 console sales. Even the Xbox Live network has been generating significant revenue through subscriptions. Microsoft recently upgraded Xbox Live to add Kinect voice control, live TV, more streaming content and some other features.

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Microsoft is working on integrating Xbox Live with Windows Phone and Windows 8, which is expected to launch in 2012. It is also working on transforming the Xbox 360 from a gaming console to a complete entertainment hub, thereby disrupting the overall TV industry, which is similar to what Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) are aiming to achieve with their own TV offerings.

Xbox, Kinect and other devices account for nearly 8% of Microsoft’s $32 Trefis price estimate, which stands nearly 25% above its current market price. We expect revenues from Xbox and Kinect sales to partially offset the lull in Windows and Office sales, at least until the launch of Windows 8 and Office 15 in 2012/2013.

We expect Xbox 360 to have around 19% share in the gaming console market in 2011, and expect the share expand to more than 26% by the end of our forecast period. By tweaking the trend-line in the chart below, you can see how an increase in Xbox’s market share impacts Microsoft’s stock price estimate.

Understand How a Company’s Products Impact its Stock Price at Trefis

  1. Xbox 360 Sells Nearly 1M Consoles in Biggest Week in Xbox History, The Official Microsoft Blog []