Microsoft (MSFT - Free Report) is firing on all cylinders to capitalize on the holiday season. Post the Black Friday sale which concluded on Nov 26, the company announced a discount of $50 on select Xbox One S and Xbox One X variants for a limited time period.
The gamers can avail Xbox One S with Minecraft Creators or Battlefield V or Fortnite Battle Royale bundles, among other variants for $249 in place of $299. The Xbox One X console with bundles ranging from Gold Rush Special Edition Battlefield V to Fallout 76, among other variants is now priced at $449 in place of $499.
Additionally, the rates of select wireless controllers have been cut by $10 and that of Xbox Game Pass by $50. The new members can availXbox Game Pass for $1.
Notably, customers who availed the Black Friday deal could save $100 on Xbox One S Minecraft bundle and up to $70 for other variants. Xbox One X was priced at $399.99 as part of the Black Friday deal.
As part of Holiday Sale, Surface deals include: a discount of up to $250 on Surface Book 2, up to $200 on Surface Pro 6, and up to $300 on Surface Laptop 2, among others.
For users purchasing Office 365 or other “Essentials Bundle” on top of PC or Surface device, the company announced discount of up to $40.
These discounts are anticipated to attract shoppers who failed to take advantage of the Black Friday deals which offered higher bargain potential. Consequently, the higher sales of the consoles and Surface devices are expected to bolster the competitive position of the company against peers like Sony (SNE - Free Report) and Apple (AAPL - Free Report) among others.
Notably, shares of Microsoft have returned 39.1% year to date, outperforming the industry’s rally of 27.5%.
Higher Sales to Offer Competitive Edge & Aid Top-Line Growth
Microsoft is leaving no stone unturned to enhance gaming portfolio with Xbox exclusives, original content, unveiling new studios, among other initiatives. As mentioned above, the company is trying its best to catch up with Sony, which has taken a huge lead in this product cycle.
In a bid to boost exclusive gaming content, Microsoft announced its newly developed gaming studio, The Initiative at E3 in June. The company has acquired Playground Games, Compulsion Games, Ninja Theory and Undead Labs, in this regard.
Moreover, Microsoft recently announced acquisition of Fallout developer, Obsidian and Wasteland-fame inXile gaming studios in a bid to enhance development of role-playing games (“RPG”). The company also enabled Xbox One users to experience Dolby Vision display via a simple system update.
Per Statista, PlayStation 4 dominated the console market by generating 19.64 million unit sales in 2017, Nintendo’s (NTDOY - Free Report) Nintendo Switch came in second with 11.85 million units, while Microsoft’s XBox One sales came in third with 8.21 million units.
We believe the aforementioned initiatives along with the extension of the holiday sale beyond Black Friday to drive gaming revenues, consequently benefiting top line growth.
Notably, Microsoft’s gaming revenues jumped 44% (45% at cc) in the first quarter of fiscal 2019, driven by robust performance from Xbox software and services (up 36% at cc) due to third-party title strength. Xbox hardware revenues soared 94% (96% at cc).
Microsoft expanded its Surface family just before holiday shopping season by introducing Surface Laptop 2, Surface Pro 6 and Surface Studio 2 devices and smart Surface Headphones.
In a bid to be consumer friendly, Microsoft announced Surface All Access program. It enables users to avail Surface Devices and Office 365 subscription for low monthly installments.
Additionally, bundling new Surface devices sales with Office 365 is a smart move and is anticipated to bolster Office 365 adoption.
The holiday deals along with these initiatives are in sync with the company’s attempt to take on Apple which dominates the market with Macbook Pro and Macbook Air.
The company is anticipated to benefit from robust adoption of Surface devices on the back of the attractive holiday sale deals. In fact, Surface revenues increased 14% (same at cc) in the first-quarter fiscal 2019 on a year-over-year basis on the back of strong performance of the latest editions— Surface Book 2 and Surface Go.
Microsoft is striving to expand its business in all the operating domains with robust strategies comprising acquisitions, partnerships, collaborations and product launches, among others. The company is strengthening almost all its services, hardware and software alike, with advanced artificial intelligence (AI) and other emerging technologies.
We believe extending the sale beyond Black Friday by trimming discounts will aid the company in bolstering its competitive strength in the direct consumer market. Moreover, the higher hardware sales will eventually benefit the top line, going ahead.
Microsoft carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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