Why Microsoft Corporation (MSFT) Can Get More Out of the Xbox One X

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With Office 365 and cloud computing central to revenue growth for Microsoft Corporation (NASDAQ:MSFT), investors may easily dismiss the importance of gaming for the company. But its Xbox updates at E3 2017 still matter for MSFT stock.

Why Microsoft Corporation (MSFT) Can Get More Out of the Xbox One X

Source: Microsoft

The Xbox community had over 52 million active users in its third fiscal quarter. The Xbox platform expands to Microsoft’s Windows 10 PC market. So the Xbox refresh fits nicely to its strategy of ensuring the online presence supports software, video broadcasting and more.

During the third quarter, MSFT launched Creative Update for Windows 10. This integrated gameplay broadcasted on the PC, through the Windows 10 operating system and on Xbox One. At E3, Microsoft announced that Xbox One X would cost $499. The company will launch the console later this year, on Nov. 7.

MSFT stock responded slightly to the news, as it bottomed at around $68 and bounced back to roughly $71. It also helped that technology stocks rebounded on the week of June 12.

Xbox One X Specifications

The Xbox One X will have many impressive specifications upgrades consumers will like. The GPU will have 6 teraflops of computing power, with the chip supplied by Advanced Micro Devices, Inc. (NASDAQ:AMD). The console will supply HDR lighting and 4K resolution.

Games like Forza Motorsport will run at 4K natively and at 60 fps. It will have 12 gigabytes of memory, so if console sales go up, this should bode well for Samsung (OTCMKTS:SSNLF) or Micron Technology, Inc. (NASDAQ:MU). Memory suppliers are already benefiting from supply shortage and strong demand.

Just as Sony Corp (ADR)’s (NYSE:SNE) PS4 is backward compatible with older games, the new Xbox will support some of the original Xbox games.

Investors should not assume the new Xbox would help Microsoft gain market share. At $499, the console will cost more than a Sony PlayStation Pro (PS4 Pro). The company did not make any announcements related to the hot Augmented Reality (AR) and Virtual Reality (VR) space. Maybe Microsoft is waiting to see where the market is going before it talks about developments in that market.

Still, consumers get an entertainment platform with the new Xbox that supports 4K blu ray.

Consumers have options. They may buy an Xbox One or Xbox One S instead, if they decide the 4K-supported console is too expensive.

Surface 5 Tablet Refresh

Microsoft’s impending announcement of the Surface tablet refresh is well-timed. Building on the positive momentum from its exposure at E3, Surface 5 is rumored to have impressive specs and will cost only $799 to start.

Powered by an Intel Corporation (NASDAQ:INTC) i5 Kaby Lake processor, the Surface 5 will last for 13.5 hours. The tablet has such a great battery life because the storage (“SSD” or solid state drive) is integrated on the motherboard. If customers prefer no noise or even less heat output, they may choose a fan-less design. Intel’s m3 and Core i5 chips do not need a CPU fan.

The hinge is the only noticeable physical update Microsoft is making on the Surface 5. This will allow users to lay the tablet and keyboard nearly flat on a table. The Surface Pen is available for another $99. Artists, especially those who are fans of Wacom tablets, may decide this is enough of a reason to switch a Surface.

Bottom Line on MSFT Stock

Software is Microsoft’s primary source of revenue and profit growth, but the hardware refresh for the console and tablet markets will give investors another reason to continue holding the stock.

As of this writing, Chris Lau did not hold a position in any of the aforementioned securities. He runs a DIY Value Investing for Value Investors newsletter.

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get actionable insight to achieve strong investment returns.


Article printed from InvestorPlace Media, https://investorplace.com/2017/06/microsoft-corporation-msft-more-xbox-one-x/.

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