Microsoft cuts price of Xbox in Europe, Australia

Friday, April 19th 2002, 12:00 am
By: News On 6

SEATTLE (AP) _ Microsoft is chopping the price of its new Xbox videogame system by about a third to compete with Sony's PlayStation2 in Europe and Australia, where sales have been sluggish since the Xbox debuted five weeks ago.

Effective April 26, Microsoft is cutting the price from $434 to $289 in Great Britain, $426 to $266 in the rest of Europe and $350 to $215 in Australia, the company said Thursday.

The new prices will match those of the PlayStation2 in Europe, while the Xbox's price in Australia will be about $75 cheaper than PlayStation2's.

Microsoft does not plan to change the price in the United States, where Xbox sells for $299, the same as the PlayStation2. Xbox debuted in the United States in November.

``Our Xbox results in North America are tracking just where we thought,'' Microsoft Chief Financial Officer John Connors said Thursday. But sales in Europe and Japan _ home territory for Sony and Nintendo _ are ``a little lower than expected.''

Xbox has been selling in Japan for $260, $40 more than the PlayStation2 and $70 more than Nintendo's GameCube. Microsoft isn't dropping the price in Japan because it's already close to the PlayStation2's price, said company spokeswoman Charlotte Stuyvenberg.

Connors said Microsoft expects that by the end of June it will have shipped 3.5 million to 4 million Xbox consoles worldwide, down from an earlier estimate of 4.5 million to 6 million. However, he told analysts Thursday that the company plans to make hefty investments in Xbox over the next year, and thinks it could have up to 11 million Xbox consoles sold by June 2003.

``We want to make sure price is not the obstacle to the Xbox experience,'' said Sandy Duncan, the company's vice president for Xbox in Europe. ``Xbox has always been amazing value for money, and now it is even more so. We are providing the right console at the right price.''

Anyone who bought an Xbox at the higher price in affected countries will be eligible for a ``special thank-you package,'' Microsoft said in a news release. The packages will differ by country but could include free or discounted software or computer gadgets.

Stuyvenberg said Xbox was introduced in Europe and Australia at the same price PlayStation2 was introduced at earlier. The PlayStation2's price has since come down.

Rob Enderle, an analyst with Giga Information Group, said the Xbox has been widely perceived as overpriced in Europe, and even now Microsoft might have trouble overcoming that perception.

And any increase in sales might not cover the losses Microsoft is suffering by slashing the price, he said.

``It was overpriced,'' Enderle said. ``The sales in Europe had been disappointing.''

Still, Enderle said, it will likely be another year before anyone can determine whether Xbox has succeeded.

``This is a long-term play, and Microsoft has a lot of money in this segment,'' he said.

The GameCube, which went on sale last fall in Japan and the United States, is expected to make its European debut next month priced at about $215.

Sony spokeswoman Monica Wik said her company isn't worried about increased competition from Microsoft and has no plans to drop the PlayStation2's price.

``We're happy with the rate our hardware is selling,'' Wik said.