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Dow Jones S&P 500 NASDAQ 10-Year Note
10,328.89 1,102.47 2,211.69 35.46
Oil *
73.88
UP
20.63
UP
6.40
UP
31.64
UP
0.59
10 Yr
3.55%
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108.95
+0.20%
+0.58%
+1.45%
+1.69%
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Dow Jones S&P 500 NASDAQ 10-Year Note
10,328.89 1,102.47 2,211.69 35.46
Oil *
73.88
UP
20.63
UP
6.40
UP
31.64
UP
0.59
10 Yr
3.55%
SPDR Gold
108.95
+0.20%
+0.58%
+1.45%
+1.69%
Data delayed 20 minutes

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Commentary: Tech Savvy
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The Xbox Sideshow Is Likely to Pump Microsoft This Year
By Jim Seymour
Special to TheStreet.com
5/17/01 3:04 PM ET



Microsoft's (MSFT:Nasdaq - news - boards) rollout of its white-hot new Xbox gaming console at the Electronic Entertainment Expo ("E3") trade show in Los Angeles Wednesday drew a lot of press of the "Wow!" persuasion -- including on RealMoney.com and TheStreet.com, and much of that from me.

That's something you have to watch out for: whizzy technology-product introductions covered by technology-gung-ho reporters and analysts. We love this stuff, and even when our heads tell us to be cautious, our hearts gush the purple prose.

I'm neither apologizing for nor backing down from anything I said on the site during and after Microsoft's splashy presentation of the Xbox Wednesday. This is a big move for Microsoft and for the computer-games industry -- a business, you may be surprised to learn, that is already larger than the movie business in America.

Millions of U.S. consumers will be caught up in the decision about whether to buy an Xbox come this Christmas season. Microsoft believes that as many as a million and a half will decide whether to buy the Xbox in the six weeks between its Nov. 8 appearance and Christmas Day -- or to spring for a Sony (SNE:NYSE ADR - news - boards) PlayStation 2 or maybe for the new and as-yet-unseen GameCube from Nintendo, scheduled to appear on store shelves three days before the Xbox arrives.

The battle between Microsoft and everyone else in gaming will be an epic one. And I think Microsoft will find the Xbox a big winner, which has to be good for its bottom line and stock price, doesn't it?

Yes and no. The economics here are tricky, and while the Street will treat with respect Microsoft's entry into serious game-playing, you can't just assume the Xbox is going to start piling up dollars for Uncle Bill. Because it won't.

First the machine, then the share-price implications.

The Box and Its Games

You're going to want one. Period. Even if you have only a small interest in gaming, you're going to want one. It's fast, it looks cool, and it has the right resources in it for game developers to exploit.

It's also downright cheap ... and that's part of the issue of its impact on Microsoft's fortunes, so keep reading.

No matter what's in the box, a game console lives or dies based on the games available for it. And Microsoft has played the game-development community like Itzhak Perlman plays his Strad. Having undertaken a "you and us, we're all programmers, we talk the same language, and we know what you want" campaign for a year and a half now, Microsoft has cuddled up to the right developers and will have the right games on the Xbox. Quickly.

The Xbox -- fast, powerful and highly promoted by the Microsoft marketing machine -- is a serious business opportunity for developers. At Wednesday's seance in Los Angeles, Robbie Bach, an experienced Microsoft manager who is shepherding the Xbox to market, said there would be 15 to 20 games available for the Xbox the day it's released, with a small flood coming shortly thereafter. That may be a little optimistic, but whatever the precise number, there will be enough.

Sega (SEGNF:OTC BB ADR - news - boards) and Electronic Arts (ERTS:Nasdaq - news - boards) headed the list of name-brand game developers on hand Wednesday and that will be on hand for a fall rollout of Xbox titles. (And many more: Bandai, LucasArts, Ubisoft, etc.)

Sega is an especially smart catch for Microsoft here. When Sega decided some time ago to bail on its lackluster DreamCast console -- "It was OK for its time, Dad, but you know, that was like Neanderthal time," my 9-year-old in-house consultant on these things likes to tell me -- Microsoft signed 'em up fast to develop for the Xbox.

Online gaming, in which players compete "live" over the Web, is the hottest corner in the business, and the Xbox will aggressively co-opt that space, too. Xboxers can don a small over-the-head earphone with a boom mike and talk with -- cajole, insult, trash-talk, whatever -- those they're playing with, if they, too, have an Xbox.

A built-in Ethernet connection will make connecting to fast cable-modem or DSL lines easy; Bach promises "plug 'n' go." (Then again, we've heard that before from Microsoft, haven't we?)

What does all this mean for the stock? To find out more, please read the second part of this column.

Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings can change at any time. Seymour does not write about companies that are, or have been recently, consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites you to send your feedback to Jim Seymour.

Check out TheStreet.com's new portfolio tracker. The new tracker, powered by Money.net, provides streaming, real-time quotes so you can track your investments throughout the day. The real-time tracker includes all exchanges fees and permits you to track more than 200 stocks at the same time. There's a 30-day free trial and it costs $9.99 a month. For more details, click here.

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Sorry, the page you requested could not be found

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Content Search:

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TheStreet Directory

Dow Jones S&P 500 NASDAQ 10-Year Note
10,328.89 1,102.47 2,211.69 35.46
Oil *
73.88
UP
20.63
UP
6.40
UP
31.64
UP
0.59
10 Yr
3.55%
SPDR Gold
108.95
+0.20%
+0.58%
+1.45%
+1.69%
Data delayed 20 minutes

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Latest Headlines