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According to leading technology website The Verge, Microsoft (MSFT) will launch the Xbox 720 with several new innovations, including next generation Kinect and Kinect Glasses, and a more accessible and targeted design for those who play casual games. The Xbox 720 is going to be a very profitable product that will increase Microsoft's revenues in the long-term.

The graph above shows the popularity surrounding the Xbox 720 console when compared with Sony's (SNE) Playstation 4 console in terms of the number of information searches in Google (y-axis, in millions). Over the last 11 months (x-axis), the number of searches for information on the Xbox 720 has greatly overshadowed the number of searches on the Playstation 4.

This trend suggests Xbox 720 sales will be higher than Playstation 4 sales. Moreover, the Xbox 720 is manufactured by an American company. On the other hand, the Playstation 4 is manufactured by a Japanese company. Most Americans prefer buying American made products at the moment, especially with the fiscal cliff looming. The Xbox 720 has a popularity index of 66% compared to Playstation 4's popularity index of 34%. In the U.S. and across the world, the Xbox 720 is more popular and resonates more with gamers than Playstation 4, with 60% indicating interest in Microsoft's console.

Analysts predict that sales of the Xbox 720 will be 55% of Xbox 360's first year sales at the time of launch. Analysts also think that Wii U will have a sales figure that compares at just 35% of Wii's sales, the Xbox's predecessor. Sony's Playstation 4 is expected to do just slightly better than Wii. I predict the Xbox 720 will boost Microsoft's revenues by the third quarter of 2013. Though the Xbox 720 may not sell as well as the Xbox 360, Microsoft will rake in more revenue and profits than its competitors Nintendo and Sony. Microsoft's earnings from its gaming segment will be higher than its competitors. The Xbox 720 will be a growth catalyst for Microsoft.

Since the Xbox 360 console was released in 2005, it has sold over 70 million units worldwide. As part of its first quarter earnings report, Microsoft revealed that it sold 1.7 million Xbox 360 consoles. The Xbox division also had total revenue of $2 billion for that quarter, which is a very impressive number considering it is just one of the many products that Microsoft sells along with its Microsoft Office suite and Windows 8 OS. Microsoft has a market cap of $231 billion and an enterprise value of $178 billion. It has a high profit margin of 21.71% and an operating margin of 36%, which should only increase further with the launch of Xbox 720. The company also posted revenue of $72.36 billion.

What Xbox 720 Will Feature

The new device is expected to hit stores later in 2013 and run a simplified version of Windows 8, offering many of the titles found in devices like smartphones, Surface RT and the Windows Phone. Concrete information about hardware is not known but it will operate offer a unified Windows 8 experience similar to other Microsoft products. The ultimate goal of Microsoft's strategy is to offer a unified experience across all products that bear its name, just like Apple (AAPL) does. We must note that Microsoft staff and officials have not revealed any information about Xbox 720 yet.

Why Xbox 720 Is Great News for Investors

The demand for an upgraded Xbox is very high and even existing users of Xbox 360 will buy the Xbox 720. The sales will definitely be higher than Xbox 720's competitors as it becomes easier to market Xbox 720 to users of Windows 8 mobile phones, Xbox Live users and Surface RT customers. Xbox is also seen as more powerful with higher processing power than its competitors like PS3 by Sony and Wii. The profits and revenue arising from Xbox 720 will increase Microsoft's prices and help investors to reap the benefits over the next few years.

Microsoft's Competitors in the Gaming Realm

Hardcore video game players often rue that Apple has done little to address their needs, forcing them to eventually use Microsoft or Sony's consoles. Though the iPad and the iPhone are often spoken about as gaming devices, they are not well suited for high intensity video games, which are built for consoles like Xbox 360. Forbes reported in July that Apple may have registered a patent for a gaming device, though we haven't heard anything about that ever since.

In November, Google (GOOG) announced a new update for the Google TV platform. The service, which was already integrated with Google Play, now comes with features like voice search, updating content related to program guide and new ways to interact with YouTube. An update on Google App Play now lets one search for videos on a tablet or Android phone and play them directly on TV. Again, Google is trying to unify user experience across devices.

Sony announced impressive figures regarding the sale of their current generation console. Sony recently reached the milestone of selling 70 million units of PlayStation 3 after launching the device in 2006. The research took into account the latest consoles sold until November 4th, 2012. The sales number greatly increased after the release of the first version of the Slim console, which comes with a reduced size and price. Changes in the storage capacity of the PlayStation 3, which in early versions was quite limited, also contributed to the sales increase. Google however predicted that Xbox 720 will easily surpass the sales of Sony's future consoles.

Nintendo announced its new generation console Wii U on the 18th of November, 2012, in the U.S. Wii's successor Wii U comes in two versions: a basic, sold for $300, which is white, has 8 GB memory, Gamepad control (which mimics a tablet), HDMI cable and sensor bar; and the Deluxe, which differs from other by its black color and has 32 GB of storage space. The Deluxe version costs $350. Sales have been impressive and the console has received critical acclaim.

Electronic Arts (EA) president Frank Gibeau had revealed in August 2012 that he expects both Xbox 720 and PlayStation 4 to be released sometime next year. Electronic Arts is known to create video games specifically for Xbox 360 and PS3, and its video games are often graphic-rich and feature high intensity game play.

Conclusion

Microsoft's Xbox 720 will be a game changer with its Kinect and other features. Being the most well known console in the world, Xbox 360 crossed the 70 million before its competitors and there is a huge demand for an upgraded version. When the Xbox 720 will be launched, Microsoft will make a lot of profits and earn wide margin thanks to a large gaming market, which has often been ignored by Google and Apple. Now is the time to invest in Microsoft, before it becomes way too expensive after Xbox 720 is announced. As these consoles product life cycles are long, we can expect that Xbox 720 will be in the market for at least 5 to 6 years and earn hefty profits for both Microsoft and its investors.

Source: Microsoft's New Money Gun: Xbox 720