Microsoft (MSFT) Simply Can't Charge Less for the Xbox One
Tweet
Share
E-mail
Get Alerts MSFT Hot Sheet
Price: $407.06 +1.52%
Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 0.7%
Revenue Growth %: +15.0%
Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 0.7%
Revenue Growth %: +15.0%
Join SI Premium – FREE
Microsoft (Nasdaq: MSFT) might be charging $100 more for its latest gaming console versus peer Sony (NYSE: SNE), but costs might actually be justified.
According to a report from IHS, a tear down of the Microsoft Xbox One shows that the company is paying about $90 million for components in its system versus the Sony PlayStation 4 (PS4). In all, parts in the Xbox One add up to about $471, versus the retail selling price of $499 per unit.
Microsoft includes a Kinect sensor with the Xbox One, which adds $75 to the cost. The console also utilizes a GPU (CPU with graphics capabilities) from Advanced Micro (NYSE: AMD), which costs the company about $110, or $10 more than the chip found in PS4 (which is also AMD).
Memory for the Xbox One cost Microsoft $28 more. The unit uses DDR3 memory, versus PS4's GDDR5 chips.
Without the controller, Kinect, or any other parts, cost to assemble the Xbox One is about $332. The controller parts run about $15 and includes Marvell (Nasdaq: MRVL) Wi-Fi and Bluetooth chips. The external power supply runs $25 and other contents found in the box cost about $10.
Assembly of the device costs around $14, IHS estimates.
AllThingsD today cites Nomura analyst Rick Sherlund in saying that Microsoft would probably lose about $1 billion this year in connection with the launch of its Xbox One.
Microsoft is more likely looking to gain on sales of digital software and accessories, but would be more than willing to take an initial loss on the device for stronger market share. Unfortunately, with parts adding $90 to the bill, there is little room for Microsoft or retailers to move on the price right now.
Shares of Microsoft are lower in early trading.
According to a report from IHS, a tear down of the Microsoft Xbox One shows that the company is paying about $90 million for components in its system versus the Sony PlayStation 4 (PS4). In all, parts in the Xbox One add up to about $471, versus the retail selling price of $499 per unit.
Microsoft includes a Kinect sensor with the Xbox One, which adds $75 to the cost. The console also utilizes a GPU (CPU with graphics capabilities) from Advanced Micro (NYSE: AMD), which costs the company about $110, or $10 more than the chip found in PS4 (which is also AMD).
Memory for the Xbox One cost Microsoft $28 more. The unit uses DDR3 memory, versus PS4's GDDR5 chips.
Without the controller, Kinect, or any other parts, cost to assemble the Xbox One is about $332. The controller parts run about $15 and includes Marvell (Nasdaq: MRVL) Wi-Fi and Bluetooth chips. The external power supply runs $25 and other contents found in the box cost about $10.
Assembly of the device costs around $14, IHS estimates.
AllThingsD today cites Nomura analyst Rick Sherlund in saying that Microsoft would probably lose about $1 billion this year in connection with the launch of its Xbox One.
Microsoft is more likely looking to gain on sales of digital software and accessories, but would be more than willing to take an initial loss on the device for stronger market share. Unfortunately, with parts adding $90 to the bill, there is little room for Microsoft or retailers to move on the price right now.
Shares of Microsoft are lower in early trading.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- The Coca-Cola Company and Microsoft announce five-year strategic partnership to accelerate cloud and generative AI initiatives
- Microsoft (MSFT) call put ratio 2 calls to 1 put into quarter results and outlook
- Spotify (SPOT) jumps 10% as Q1 revenue, gross margins beat Street's estimates
Create E-mail Alert Related Categories
Insiders' BlogRelated Entities
Nomura, Rick SherlundSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
