I don’t want to be a party pooper, but there aren’t a lot of reasons to think Microsoft stock should react to Kinect at this point. Look at the numbers: Microsoft does about $66 billion in annual revenue, $21 billion in net income.
Most of that comes from high-margin software sales to businesses, so it takes a lot to move the needle on this stock.
Now, 1.37 million Xbox 360 units in November, NPD’s number, is nice, but that comes out to around a half billion dollars of low-margin revenue. For Microsoft, that’s a drop in the bucket.
And let’s talk about Kinect a moment: Microsoft is poised to do well with this – the concept is that it’s a motion-sensing accessory for the Xbox 360 console, taking the Nintendo Wii concept to the next level. You don’t need a controller, you just move around.
So is it killing the Wii? It’s not. Nintendo sold 1.27 million Wiis in November, just 100,000 less than the 360 – and the Wii is four years old.
Microsoft projects sales of 5 million Kinects in the holiday quarter, which is very good but not unprecedented: Nintendo did a little better than that with the Wii back in 2008, its third holiday season on the market.
If Microsoft were selling 5 million phones this quarter, that might move the stock. 5 million Kinects is more of a stocking stuffer.