Microsoft Corporation (MSFT): Is It Time to Sell Those GameStop Corp. (GME) Shares?

New information was leaked this week about the new Xbox console. It’s been called Durango and the Xbox 720. Either way, this week’s leaks make it look as though the console will always be connected to the internet and that games can be installed, but not playable, from the disc, which is a not-so-thinly-disguised code for “no used games.”

When Sony Corporation (ADR) (NYSE:SNE) unveiled plans for the PlayStation 4 earlier this year, they quietly sidestepped the issue of used games, but many people in the industry, after looking at the specs, have postulated that Sony was waiting to see what Microsoft Corporation (NASDAQ:MSFT) would do, so that they could effectively fall in line to kill off or keep the used game market.

The Wii U, which Nintendo released late last year, still allows gamers to play used games on their console. Will the ability to play used games give the Wii U the boost it needs to finally outsell the competition? Only time will tell, but I have a hard time believing that GameStop Corp. (NYSE:GME) could stay alive in a market where it could only sell used games for Wii U and previous generation Xbox and PlayStation consoles. After all, GameStop makes it’s real money in the used market, where it enjoys 100% of the profits, as opposed to the new game market, where it reaps a much smaller percentage.

Lets look at the players in this drama.

Microsoft

For the last three years, Microsoft Corporation (NASDAQ:MSFT)’s stock prices have been hovering around the $30.00 mark, but a new Xbox on the horizon might be just what the company needs to boost sales and excite investors again. With a market cap of $236.34 billion, and a price earnings ratio of 15.50, Microsoft remains a strong company, but they aren’t just in the game console business. Pressures in other markets complicate the overall picture for Microsoft. If I already owned stock in Microsoft, I’d be inclined to hold it, certainly through the release of the new Xbox, but I’m not sure I’d buy now, not with the lackluster sales of Windows 8 and all the pressure from Google.

Sony

Like Microsoft Corporation (NASDAQ:MSFT), Sony isn’t just in the game console business. Sony has stiff competition on all sides and stock prices have generally trended downward for the last few years. Sony has been trending up for the last few months, which may be due to excitement surrounding the new PlayStation 4. Whether that excitement can carry through to the actual release of the console is anyone’s guess, but with a market cap of $17.39 billion, and a price earnings ratio that isn’t being reported, I’m worried about Sony. With rival Samsung beating them on so many fronts, I’m not sure the PlayStation 4 is enough to ever pull their stock prices back up to where they used to be.