Software developer Microsoft Corporation (MSFT) slashed the price of its gaming console, Xbox One, again by $50. The console is now back to its holiday pricing of $349.
In Nov 2014, Microsoft had slashed the price of the Xbox One by $50 to $349 to gain a price advantage against Sony Corp. (SNE) during the holiday season. However, the cheaper version didn’t feature the Kinect motion sensor for gesture and voice control.
The aggressive price cut strategy resulted in strong sales of the console and also effectively challenged PlayStation 4 (PS4) sales. Sales more than tripled in the U.S. According to the company, more than 10 million Xbox One consoles were sold to retailers during the period.
Last week, Microsoft increased the price of the gaming console and it was available at its earlier price of $400 at retailers across the U.S.
The console was launched in Nov 2013 and was initially priced at $499. In May 2014, the company slashed the prices by $100 to $400 after removing the Kinect following lower demand for the peripheral. Xbox One users were previously compelled to buy the extra accessory for the system, which made the console more expensive than Sony’s device. This likely affected sales.
Therefore, the decision to exclude Kinect from Xbox One was based on consumer response as well as to enable the system to contest with Sony's popular and cost-efficient PS4.
These strategies have paid off well for the company at least in the short term. The latest cut however came much earlier than anticipated as the price was raised only last week.
In fact, Xbox sales are not only threatened by PS4 sales but also by social games. The emergence of mobile platforms such as smartphones and tablets from Apple (AAPL) and Samsung remain headwinds for video game hardware sales. Video game publishers are now inclined to make games that are compatible with these devices.
Only time will tell whether Microsoft succeeds in maintaining Xbox sales with these price cut strategies or not.
Microsoft has a Zacks Rank #4 (Sell). Adobe Systems Inc. (ADBE) is a better-ranked stock in the technology space with a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment