GameStop expects $50 PS3, 360 price cuts

Specialty retailer assures investors that lofty full-year guidance factors in an incremental reduction in price for Sony and Microsoft's consoles.

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GameStop may not create video games, but it sure does make a killing selling them. Yesterday, the world's largest specialty-gaming retailer announced second-quarter net earnings to the tune of $57.2 million--nearly triple its profits from a year ago--on revenues of $1.8 billion. As part of the better-than-expected results, GameStop also said that it was revising upward its full-year guidance to investors, projecting its total sales in 2008 to climb 23 to 25 percent.

Interestingly, those estimates take into consideration a $50 price cut for both the Xbox 360 and PlayStation 3. Speaking to analysts in a postearnings conference call, GameStop chief operations officer and vice chair Dan DeMatteo commented, "Our guidance continues to assume the hardware price cut we talked about at the very beginning of the year, assuming there is about a $50 price cut on both the [Xbox 360] and PS3 going into the holiday season."

DeMatteo went on to say that GameStop expects sales of consoles in 2009 to continue unabated, "because most likely what will happen is the manufacturers will begin lowering the price to keep the velocity going."

Neither Microsoft nor Sony's consoles have had a price-cut proper in 2008, though both have seen hardware revisions. During this year's E3 Media & Business Summit, Microsoft announced that it would be discounting its 20GB Xbox 360 Pro to $299, but then discontinuing the SKU and replacing it with a 60GB system once supplies of the former dried up. Increasingly convincing rumors indicate that Microsoft will soon slash the price of all three of its SKUs, with the 120GB Elite and 60GB Pro shedding $50 each from their respective sticker tags of $449 and $349, and the HDD-less Arcade model dropping $80 to $199.

After saying that it would not discount the PS3 this year on the eve of E3, Sony revealed at its E3 press conference that it, too, would be tweaking its hardware strategy. The publisher said that it would replace its current 40GB PS3 with a similarly non-backward-compatible 80GB model at the same $399 price point. Just this week, Sony introduced a 160GB PS3 bundled with Uncharted: Drake's Fortune that will ship in November for $499.

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