Business Week has been writing about the Xbox 360 and how it can raise it's sales to keep it's lead. Microsoft expects the sales to rise from 10% to 18% in 2008. If they can time it right with a expected price drop after the PS3 got one, then their sales can boost up more. Charles Di Bona II, senior research analyst at Sanford C. Bernstein says they should give the 360 a price drop before Christmas, but after the release of Halo 3.

The solid quarter led Microsoft to raise fiscal 2008 revenue guidance given in April by roughly $300 million. Now Microsoft believes it will generate $56.8 billion to $57.8 billion in the current fiscal year, up about 12% from the year just closed. And the company increased its operating income guidance $200 million from April. It's now projecting operating income of $22.2 billion to $22.7 billion in the current fiscal year, up roughly 21% from fiscal 2007.

Baked into the new guidance is Microsoft's expectation that sales in its Entertainment & Devices Div., which includes the Xbox unit, will climb 10% to 19% in fiscal 2008. The wide range is notable because it gives the unit's management the flexibility to cut console prices during the year, something most analysts expect, particularly after Sony (SNE) reduced prices on the most recent iteration of the PlayStation console (see BusinessWeek.com, 7/9/07, "Sony's Surprising PS3 Price Cut"). "My operating assumption is that you get a price cut before Christmas," Di Bona says. He says the reduction wouldn't come until after the Sept. 25 release of Halo 3, the follow-up to two of the hottest-selling titles in video game console history.

Synergized via businessweek.com »