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CSFB Positive on Microsoft's Xbox Price Cut

Microsoft (MSFT) reduced the price of its Xbox game console to $199.99. CS First Boston says the price cut is positive, and not a concern for fiscal 2003 estimates. The firm reiterated its strong buy rating on Microsoft.

Analyst George Gilbert says the move comes in response to Sony's price cut on its PS2. Gilbert says the price cut is positive and will drive software and gaming revenues higher than his $532 million fiscal 2003 (ending June) estimate, adding to EPS power. He notes that an incremental $30 reduction in the Xbox price will not impact his estimates; his Xbox revenues and cost of goods sold estimates have built-in cushions of $60 and $40, respectively. The analyst notes he has not accounted for any margin contribution from peripherals that make money for Microsoft. He maintains his $1.83 fiscal 2002 and $2.04 fiscal 2003 EPS estimates.

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