Lazard: Xbox 360 Price Cut 'Unlikely' In Early 2007

Following yesterday's announcement by Microsoft that the company would cut its Xbox 360 hardware shipment guidance for the 2007 fiscal year, Lazard Capital Markets' Colin Sebastian has commented that a price reduction for the console is “unlikely”, at least in early 2007. In a research note to investors, Sebastian commented on the implications of this announcement, stating, “Based on the company’s revised unit guidance and stated focus on segment profitability, we now believe that a price cut on Xbox 360 hardware is unlikely in early 2007.” “However,” he adds, “we would not yet rule out a price reduction or promotional hardware/software bundle before the end of the calendar year depending, in part, on the competitive landscape.” Currently the Xbox 360 is available under two distinct SKUs, with a $299 model being available without a hard drive, and a $399 version with the hard drive included. Microsoft CFO Chris Liddell announced yesterday, following the company's second quarter earnings announcement, that shipment estimates for Xbox 360 hardware had been reduced from 13-15 million to 12 million for the fiscal year ending June 30th, 2007. The company had shipped 10.4 million Xbox 360s to stores by the end of 2006, surpassing its previous estimates of 10 million. Regardless of Microsoft's revised outlook, the analyst notes that the overall impact to software sales for 2007 will be negligible. Lazard currently forecasts a 15 percent software sales growth within the U.S. for 2007. Much of this expectation, according to Sebastian, is based on a strong line-up of titles currently expected to ship in 2007 for the Xbox 360, including Halo 3, Grand Theft Auto IV, Crackdown, Mass Effect, Bioshock and Splinter Cell, among others. "North America remains the strongest Xbox 360 market," wrote the analyst. "However Microsoft appears to be making some strides in other geographies, most notably in the U.K, while we believe sales remain weak in Japan."