Xbox Enthusiasm, Retail Stocks and Microsoft (MSFT, BBY)

Tony Sagami (Harvest Advisors) submits: Date: Tuesday November 22, 2005. Where: Best Buy in Kalispell, Montana. It’s 6:45 in the morning and I am standing in a very long line, having driven 25 miles. What the hell am I doing out here? Like millions of other parents across the country, I am standing in line to make sure my sweet little boys will have this year’s red-hot toy of the year under our Christmas tree. The store I’m standing in front of is a Best Buy and the toy I’m talking about is the Xbox 360, Microsoft’s new generation video game console.

All across America, electronic shops opened their doors at midnight to throngs of eager youths and parents hoping to snag the new Xbox console.

• More than 200 shoppers braved rain and chilly temperatures for 30 hours in front of Best Buy in midtown Manhattan.
• GameStop, the nation’s biggest video-game retailer, sold out two weeks ago.
• On Ebay, units were going for as much as $1,225 -- more than three times the retail price.
• In Bellevue, Washington -- the home of Microsoft –- one man had been standing in line for five days to assure he wouldn’t go home empty-handed.
• In San Jose, shoppers were in line so long that ambulances were on hand in case any gamers passed out and street vendors were selling popcorn and doughnuts.

What’s behind all the hype? Unbelievable graphics.

The graphics are so crisp and sharp that you can see individual blades of grass rippling in the wind, beads of sweat on player’s faces, and amazingly realistic blood spatters that are cinema quality.

These great graphics are courtesy of a custom-designed, turbo-charged processor chip from IBM and revolutionary graphic chips from ATI Technology (a separate success story by itself).

Additionally, Microsoft has 18 new video games lined up for release, three of which -- Kameo: Elements of Power, Perfect Dark Zero and Project Gotham Racing 3 --- are produced by Microsoft itself, which means even more profits.

Lastly, the Xbox 360 can be connected to the Internet and permit kids to engage in multiplayer online gaming, buy virtual gear for virtual characters, enter tournaments, compete for prizes, challenge other players in ranking ladders, and build a global reputation.

An Xbox Live Gold account goes for $7.99 a month. After Microsoft signs up my and a couple million other kids, the recurring revenue will amount to hundreds of millions of dollars a year.

No question -- the Xbox 360 is a “must have