On May 21st, gamers will finally get details on the upcoming XBOX 360 follow-up from Microsoft (MSFT). The new console will finally be given a name on Tuesday. New rumors from IGN cite the name as the XBOX Infinity. This comes after months of gamers nicknaming the device the XBOX 720, due to it being the follow-up to the XBOX 360. The console will be released in 2013 along with Sony's (SNE) Playstation 4. Both consoles get a late start to the new round of consoles, after Nintendo (NTDOY.PK) released the WiiU back in 2012.
Just as I did with the Playstation 4 event, here is a preview of items to watch during the event.
Will Activision be the Big Winner Again?
I proclaimed Activision Blizzard (ATVI) the winner among other companies at the Playstation 4 reveal. At that event, Blizzard announced that the popular game "Diablo III" was coming to Sony consoles. Activision executives were also on hand to show details of its new game "Destiny". From Bungie, the makers of "Halo", "Destiny" was one of the most talked about games at the Playstation 4 event.
Now at the XBOX event, Activision could once again be the winner. The company will be showcasing its newly announced "Call of Duty: Ghosts" game. For the first time, gamers will get to see gameplay from the newest game in the popular series.
Gamestop: Winner or Loser?
Similar to the Playstation 4 event, video game retailer Gamestop (GME) has a lot to win and lose from Microsoft's reveal. With three new consoles during the 2013 holiday season, Gamestop could be in for one of its best years ever. The anticipation around new consoles will likely drive pre-orders and bundle sales for consoles and games in stores.
However, there could also be a huge letdown from Microsoft's release for Gamestop. It has been rumored that the new XBOX console will use unique video game codes. This means that those used games that Gamestop carries such a high profit margin on would start to lose their value fast. Gamers would need to buy their own copies of games and won't be able to sell the game, trade it in, or even let a friend borrow it. Sony chose not to utilize this technology for its Playstation 4, so Microsoft is not likely to push away certain gamer fans with a move like this. However, it does bear watching, and could cause Gamestop shares to drop significantly on Tuesday.
AMD Parts Inside
One of the other winners from the Playstation 4 reveal was Advanced Micro Devices (AMD). Confirmed as a component maker for the Sony console, AMD saw shares jump on the official announcement. Now with the possibility of being inside of both new 2013 consoles, investors might take notice. Sales from AMD could be very strong for the next several fiscal years as the new console cycle begins. Watch shares of this sub-$5 stock closely.
Does XBOX Revenue Account for Enough?
In fiscal 2012, Microsoft's entertainment and devices segment made up only $9.6 billion of the company's total $73.7 billion. Entertainment revenue is expected to cross the $10 billion mark in fiscal 2014.
The entertainment segment also has smaller margins than the other segments, like Windows and the company's business division. The fact remains that XBOX is one of the premier consoles out there. Microsoft has over 46 million members on its XBOX Live.
Sony did not release a price during their conference. In the highly competitive world of video game consoles, one of the gamemakers needs to draw first blood and show the public a price. Could Microsoft step up to the plate and announce an intended suggested retail price? This would be a huge event and could lead to Sony announcing prices below the new XBOX. Also, expect Nintendo to cut the price of its WiiU to stay competitive, depending on a pricing update from Microsoft or Sony.
Will Gamers Be Upset if They're Always Online?
One of the biggest rumors surrounding the new XBOX console is an always online theory. If this is confirmed by Microsoft, gamers would have to have an internet connection and stay constantly connected. This has already heated up on message boards and caused some gamers to voice their frustration.
Will it be enough to keep gamers away? Well, it might keep some gamers from buying the console, and may give Playstation 4 some extra sales and marketing ability. As an investor, I would not be worried about this and think it will have minimal impact on sales of the new console.
Can Microsoft Shares go Higher?
On Monday, shares of Microsoft hit a new 52 week high for the second consecutive trading day. With shares above $35, Microsoft shareholders have seen their shares up over 26% on the 2013 calendar year. In fact, shares now trade at a five year high for the company.
Microsoft shares have a couple things going for them. One will be momentum on Tuesday as investors are pleased or disappointed with XBOX details. Expect Microsoft to be one of the most traded stocks for Tuesday and Wednesday's trading sessions. Also, Microsoft shares still trade at reasonable valuations, despite the rise in share price. Shares trade at 12.7 times the $2.76 expected in fiscal 2013 earnings per share. Going forward, shares trade at only 11.4 times estimated fiscal 2014 earnings per share of $3.07.
Almost every investor has something to love in Microsoft. The company offers a decent yield, with a growing dividend. The shares trade at great values going forward, offering room to run before next fiscal year. Momentum investors will also see shares have spikes between now and Fall, when the new XBOX console is released. If you haven't gotten behind Microsoft shares yet, now might finally be the time.