Xbox One Disaster Hurts Microsoft Corporation (MSFT)

While Internet surveys are undoubtedly an imprecise indicator, a recent Polar poll reveals that nearly 80% of respondents would still pick the PlayStation 4 over the Xbox One if the two consoles were priced evenly. If Microsoft were forced to cut the price of their system prior to their strategic schedule in order to keep pace with Sony’s console, their gaming division will take a significant financial hit. Failure to establish the console as the premier gaming device means that the company’s highly important Xbox LIVE platform will lose much of its mind and market share. Xbox LIVE stands as a golden goose that Microsoft can ill afford to lose, so the company may face a scenario where a premature Xbox One price cut is necessary to ensure that the online platform and its console don’t sputter out.

The failure of the Xbox One unveiling evinces systemic issues within Microsoft. According to industry reports, Microsoft was reassured in its pricing and system design strategies by indications and speculation that Sony was more or less following the same course. Whether intentionally or not, Sony effectively played on Microsoft’s recent propensity for following rather than innovating or innovating in areas that do not appeal to the consumer base.

I think the present stock price takes into account the fact that the company’s personal computer sales are on a downward trend. I do not think that the price accurately reflects the very real possibility that the Xbox One winds up a significant failure and sets back Microsoft’s ambitions to transition towards a service-based business model. With CEO Steve Balmer taking over the Xbox division until a replacement for Mattrick is selected and the company having difficulty with other elements of its business, it’s hard to be excited about the future.

The article Xbox One Disaster Hurts Microsoft originally appeared on Fool.com and is written by Jim Everett.

Jim Everett has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Jim is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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