Expensive PS3 components add to console's cost, making it double the 360's at current countAccording to Next Generation, a recent Merrill Lynch report explains that a hardware component cost comparison between Microsoft's Xbox 360 and Sony's PlayStation 3?is giving?the former a signifigant price advantage.?It has reason to believe that should the PS3 launch by late 2006, it will cost twice as much as the 360:
"...The PS3 will not only be significantly more costly than Xbox 360 at launch, but will continue to operate at a cost disadvantage for several years. ... We think that the Xbox 360 could be selling at half the price of PS3 in the latter half of 2006....Our analysis indicates that Microsoft has a significant advantage in terms of cost. Taking Sony's weakened financial condition?and Microsoft's deep pockets into consideration, we conclude that Microsoft's Xbox 360 should emerge as the early winner in the next round of the game console wars.
Competitive pricing [for Microsoft] could hurt margins for Microsoft in the near term, but we think that Microsoft has the potential to exit 2006 with an installed base of 10 million units, with all that implies for more profitable software sales for 2007."
Though Microsoft will likely take losses making the 360 consoles, the report expects the company to break even through sales by the end of its first year with around 2 million units, and finally begin raking in profit?with 7 million by 2006.
However Merrill Lynch's report concedes that nothing is set in stone for Sony, provided the company can set aggressive pricing for their PS3 without greatly increasing?the losses they are expected to take on?its console hardware components.
Article Link: Next Generation
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