From Banc of America Securities. Some of you people here may care.....full report at link.
Xbox 360 Supply Chain, A Closer Look
♦ As Xbox 360’s much anticipated launch (Nov. 22nd) gets closer, we are
presenting here a comprehensive overview of the new game console, including
its components, manufacturers, pricing, and supply chain.
♦ Powered by a next-gen hardware and software design, Xbox 360, in our
view, will deliver an impressive gaming and entertainment experience. Key
features include a powerful IBM 3-core processor and ATI graphics processor,
wireless controller, HD video/audio support, Xbox live, (for online usage) and
backward compatibility.
♦ Market segmentation using dual pricing scheme should drive near-term
demand and raise penetration rates for Microsoft with gaming audiences.
We believe that the market is fairly bifurcated between hard-core and casual
gamers and that dual pricing can provide an opportunity to capture both
markets.
♦ Supply chain constraint overshadows demand upside. Our sense is that the
current supply chain constraint was possibly in the CPU area. However, most
recent data points from chip suppliers seem to support an incremental
improvement in volumes. Also, our back-of-envelop calculations indicate that
adequate supply is, or will be available during or shortly thereafter the holiday
season. Either way critical mass will be achieved prior to the release of a
competitive console.
♦ Valuation and Target Price Analysis: At 19x FY06E FAS 123 adjusted EPS,
we believe valuation is compelling vs. software at 22-26x.
Xbox 360 Supply Chain, A Closer Look
♦ As Xbox 360’s much anticipated launch (Nov. 22nd) gets closer, we are
presenting here a comprehensive overview of the new game console, including
its components, manufacturers, pricing, and supply chain.
♦ Powered by a next-gen hardware and software design, Xbox 360, in our
view, will deliver an impressive gaming and entertainment experience. Key
features include a powerful IBM 3-core processor and ATI graphics processor,
wireless controller, HD video/audio support, Xbox live, (for online usage) and
backward compatibility.
♦ Market segmentation using dual pricing scheme should drive near-term
demand and raise penetration rates for Microsoft with gaming audiences.
We believe that the market is fairly bifurcated between hard-core and casual
gamers and that dual pricing can provide an opportunity to capture both
markets.
♦ Supply chain constraint overshadows demand upside. Our sense is that the
current supply chain constraint was possibly in the CPU area. However, most
recent data points from chip suppliers seem to support an incremental
improvement in volumes. Also, our back-of-envelop calculations indicate that
adequate supply is, or will be available during or shortly thereafter the holiday
season. Either way critical mass will be achieved prior to the release of a
competitive console.
♦ Valuation and Target Price Analysis: At 19x FY06E FAS 123 adjusted EPS,
we believe valuation is compelling vs. software at 22-26x.