Microsoft Pares Down Xbox 360 Price

SAN FRANCISCO -- Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks) shaved $50 off the price of the Xbox 360 in a move to spur sales of its two-year old video game console.

With cutthroat competition among console makers, Microsoft needs to entice potential customers as its rivals move aggressively to stay ahead.

Sony(SNE Quote - Cramer on SNE - Stock Picks) dropped the price of its 60-gigabyte PlayStation 3 model last month by $100 to $499, and Nintendo(NTDOY Quote - Cramer on NTDOY - Stock Picks) plans to introduce new games to keep up consumer interest in the Wii.

Microsoft's price cut on the Xbox 360, beginning Wednesday, as well as a slew of game releases in the next few months for the console, including Electronic Arts'(ERTS Quote - Cramer on ERTS - Stock Picks) hit football title, Madden NFL 08, Halo 3 and Activision's(ATVI Quote - Cramer on ATVI - Stock Picks) Guitar Hero III, should keep gamers interested.

Microsoft said the Xbox 360 -- with a 20GB hard drive, wireless controller and headset -- will now sell for $349.99. The Xbox 360 Core System has been priced $20 lower at $279.99 and the Xbox 360 Elite, with a 120-GB hard drive, will be sold at $449.99 -- a discount of $30.

Sales of Xbox 360 could jump up by as much as 35% to 50% estimates Michael Pachter, an analyst with Wedbush Morgan, which does not own shares or have an investment banking relationship with Microsoft.

Shares of Microsoft were down 20 cents, or 0.6% to $29.34 in recent trading.