Microsoft stock upgraded on digital entertainment
by Justin Murray 
{ Nov 20th 2006 at 8:57PM }
After last Friday's PS3 launch, the world (Sony's idea of the world that is) finally got a taste of what the PS3 is ultimately about. With the ho-hum reception the system has been getting over the weekend, analysts around the world can finally get an idea of how the next gen battle will shape up. Credit Suisse, an ultimate non-fanboy (if they chose wrong, they can stand to lose a lot of money), has decided to upgrade Microsoft's (MSFT) stock.
Credit Suisse cited Microsoft's improving position in digital entertainment as a key reason why they chose to upgrade the stock to "outperform" from neutral; Credit Suisse expects Microsoft stocks to improve by 20%. Digital entertainment -- officially known in Microsoft as the Entertainment and Devices Division -- includes the Xbox 360.
While we can only postulate what part of digital entertainment is responsible for the upgrade, the Xbox 360 leads the pack; it is singled out in Microsoft's annual report as the key reason why the division posted more than $1 billion in revenue growth fiscal year 2005 to fiscal year 2006. Could the lack of post-launch PS3 love be the reason Microsoft is getting the thumbs up from a major financial institution?
Reader Comments (Page 1 of 1)
foodgoes @ Nov 20th 2006 9:07PM
with great games, even like this one, i don't see why not.
http://www.gamerankings.com/htmlpages2/935895.asp?q=Sneak%20King
http://www.gamerankings.com/htmlpages2/928385.asp
http://www.gamerankings.com/htmlpages2/929232.asp
ChrisL @ Nov 20th 2006 9:11PM
Sony really botched pretty much everything on the PS3. I'm not going to say it's a bad system, however it's not going to be able to set itself apart, performance-wise, from the 360 which does and will cost 66% as much for some time. Meanwhile the Wii is a big ol' snowball careening down a huge mountain. It's liable to be an avalanche long before it hits the bottom.
All Nintendo needs at this point for the system to be a runaway success is a couple of stellar 3rd party entries. A FPS which properly uses the wiimote+nunchuck for aiming is all I'm waiting for to declare the Wii my console messiah (FPS on consoles with gamepads are just lame).
I'd like to think I'm pretty impartial to the whole console thing, as I've been a PC gamer exclusively for over a decade, but anyone ignoring the potential the Wii has might as well go join a flock (herd?) of ostriches on a nice, sandy beach somewhere.
Remember the Betamax!
ChrisL @ Nov 20th 2006 9:14PM
Err, I kind of got off topic there and forgot to get back on. I do believe Sony and M$ will be neck-and-neck throughout this generation, as the 360 is a very legitimate competitor to the PS3 for the "we like shiny, pretty things" sector of gamers.
Milkshake @ Nov 20th 2006 9:57PM
I have owned ps1, ps2 and I decided after the ps3 was delayed that i would get an xbox 360, I have not regreted that decision in the slightest.
It has been awesome, live is so cool the games are getting better Gears of Wars rocks and with the likes of blue dragon, lost planet, alan wake, and now some cool gems coming to live arcade it seems that the 360 is maturing into the number one system of choice.
MS has really used all their PC history and techincal ablilty to deliver a online service that really does feel solid and practical, it works like a dream.
I for one will not be getting a PS3 at all. I want something that works well now, not sometime in the future, sony has always hyped the PS3 like they did with the PS2 emotion engine(yes i havent forgot that bollocks)and this time I voted with my mind which has also helped my bank balance.
paul @ Nov 20th 2006 10:32PM
For all the crap Microsoft takes, I'm glad to see them get credit where credit is due. They played their cards right on this one. The game is far from over, but I think it's safe to say they have Sony exactly where they want them.
nick @ Nov 20th 2006 11:10PM
If Sony weren't so ambitious with the PS3, they could have easily dominated another generation. Think about it. Were consumers beating down the door asking for Cell and Blu-Ray? Not really. But Sony insisted upon it. Had Sony produced a PS3 that never included Blu-Ray or Cell, but with a better processor and graphics with a price point between $300-400 and was backwards compatible, then they could have easily outsold Microsoft and Nintendo just by sheer momentum.
Instead, Sony provided an opportunity for both Microsoft and Nintendo to do better this generation.
I'm not saying all is lost for Sony. I think they're going to be okay. But I think it's going to be harder for them this generation than last. And I think they did it to themselves.
AG @ Nov 20th 2006 11:17PM
Xbox fanboys say what you want, but the ONLY reason this stock was upgraded is because we are getting very close to their release of Vista(which is their cash cow) Xbox is only a small portion of their corporation, with their meat and potatoes being in their Operating System and Office. These two products create such an enormous amount of money for them that they can take hits big hits in their gaming division(original xbox and 360 have yet to generate a profit for them, with the original Xbox so far in the red it will never)
DEEZNUTZ @ Nov 20th 2006 11:40PM
@AG
Read the post, it was due to their improvement in digital entertainment, nothing to do with VISTA. They knew about VISTA a while back so if you know a bit about stock pricing (Efficient markets) VISTA news affected their stock price a while back.
Sorry dude, no conspiracy or fanboyism here,just plain ole analytical non-biased rating of MS performance, in this case, their digital entertainment segment.
PS reading is fundamental.
Mosatii @ Nov 20th 2006 11:45PM
@AG
Ah, no. That was most definitely not the only reason the stock was upgraded, maybe you should study up on your reading comprehension before you so adamantly declare something as truth; which is of course based on your very solid knowledge of the subject.
Kish @ Nov 20th 2006 11:49PM
You ever feel strongly about something and start immediately typing out a post, then think about it and decide not to. Then try to reword it, and still realize that despite deeply held feelings your argument really doesn't hold water. And then finally decide that the other guy probably is right and you shouldn't be bashing about it when their point is clearly valid, and just accept the truth of the situation? Yea I just did.
More post'ers should do that I think. :)
skyrous @ Nov 21st 2006 12:20AM
@AG
like it or not Sony's fouled up launch has left the door wide open for either Nintendo or MS to move in. The analysts understand this. in the past 10 years the playstation has been a cash cow for Sony. If Sony falls back and the 360 takes over then video games won't be a fraction of MS revenues anymore. And that deserves a stock upgrade.
rask @ Nov 21st 2006 12:43AM
That division has 2 things going for it. The 360 and the newly released Zune.
I'm getting the strong showing of MS vs Sony's weak start, the video on demand coming Wednesday and the hype of the Zune is what is prompting this upgrade.
Bo @ Nov 21st 2006 1:01AM
I believe Microsoft's products are very good.
I recently purchased the Zune, eventhough I already have an iPod. I really like the Zune's big screen for ripped DVD's. Very easy on the eyes and a perfect size for entertainment-on-the-go; not too big like the PSP and not too small like the iPod. I've found myself using the Zune more often than the iPod for watching video and listening to music.
I think the problem with Microsoft's gadgets is that it's not geared toward casual users but more leaning toward geeks. The extent I've used the Xbox 360 (with 60" HDTV, surround sound, Windows MCE) and Zune (Video/Music ripping), I don't think casual users can appreciate the products without experiencing them to its fullest.
Untamed @ Nov 21st 2006 1:01AM
Zune? Hype?
No.
nick @ Nov 21st 2006 1:03AM
...or video downloads and the Xbox 360. I don't think Zune is enough to drive the stock higher. It was introduced a couple of weeks ago, and is generating just minor buzz at the moment.
The 360 is the major property in the entertainment division. And with Sony having limiting stock, and Microsoft having stock for their first Christmas, this is just a no-brainer.
Steve2 @ Nov 21st 2006 3:16AM
The Xbox division has been adept at throwing money down the tubes.
Why would Credit Suisse upgrade them on strong sales of 360 when it has failed to translate into profits so far?
Besides, 360 is selling slowly. MS will never sell 10M in the first year like they predicted.
This makes no sense.
fahmi @ Nov 21st 2006 6:24AM
steve2,
because you're a better financial analysist than say... Credit Suisse?
nick @ Nov 21st 2006 9:14AM
Throwing money down the tubes? Microsoft increased revenue and has a new avenue to sell software. A lot of software. They're a software company after all.
If you look at Sony's financials, the picture isn't rosey. Sony has 18 billion of debt at the moment. Microsoft currently has no debt.
http://finance.yahoo.com/q/ks?s=SNE
http://finance.yahoo.com/q/ks?s=MSFT
Hoffer @ Nov 21st 2006 10:36AM
I know I love my 360. People may rip on MS's software like Windows, but they got the 360's dashboard right. Looking at video of $ony's P$3 OS looks downright painful. Then add in their 10 year old idea of an online system and you've got a real piece of crap.
Thankfully this stuff can be fixed with future firmware updates. Considering what they did with the PSP, we can probably expect 1 a month.
Philip W. @ Nov 21st 2006 11:05AM
@AG
"These two products create such an enormous amount of money for them that they can take hits big hits in their gaming division(original xbox and 360 have yet to generate a profit for them"
360 is already making them money:
http://www.isuppli.com/news/default.asp?id=6919&m=11&y=2006
Mark Felps @ Nov 21st 2006 11:06AM
I read somewhere last week that MS is beginning to see a profit from 360 hardware sales (on a per unit basis, not overall). If they're making money on the boces, before Black Friday, that alone is a pretty good reason to bump up their stock. They'll finally stop bleeding money from hardware sales, and be able to enjoy their high attach rate.