Surprise, surprise, no price cut expected

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Surprise, surprise, no price cut expected
Next Generation more or less shot down yesterday's rumored price cut for the 360. Basically all they did was reiterate everything we said, only more elaborately and eloquently (we're still flattered though). Michael Pachter of Morgan Securities breaks it down old-school analyst style:

" ... The company plans to sell 10 million Xbox 360 hardware units over the next year, so a price cut in November would likely impact 8 million of these, costing the company $800 million. At a software royalty profit of around $10 per unit, the company would have to sell 80 million incremental software units in order to be in the same place as without a price cut.

" ... Our model has Microsoft selling only around 60 million total units of software this fiscal year, so in order to break even on a price cut, they would have to sell 140 million pieces of software. Remember, we're talking about profitability for FY:07, not over the life of the 360."


That's a lot of software. Next Gen even mentions Peter Moore's comments to Joystiq during E3: "We had a price drop ... when Sony announced their price."

So, don't expect a price drop before next year. Do expect a software bundle instead.

[Thanks, Thomas Crymes]
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