‘Early Signs’ Show Kinect Broadening Xbox User Base, Microsoft Says

SAN FRANCISCO -- Microsoft is “seeing early signs” that its Kinect motion sensor is broadening the Xbox 360 user base “to more than just hardcore gamers,” Chief Financial Officer Peter Klein told a Morgan Stanley conference Wednesday. “How big that can be is anybody’s guess,” he said. Over the past year, Microsoft has “really expanded” the 360 business, Klein said. The company shipped a new slim version of the console just after E3 in June last year, and that “really started our momentum in the business, and it really, really accelerated with Kinect,” released in late 2010, he said.

There’s also “still a lot of opportunity in” Office 2010, but Klein said “the cloud remains the largest trend opportunity going forward” for Microsoft. An especially “great opportunity,” he said, is that there’s “going to be a need for smart devices interacting with the cloud.”

Tablets “provide a really exciting opportunity,” Klein said. Most tablet sales have been as a “consumer secondary device” so far, but “you are starting to see it come into” the business sector also, he said. “I think going forward, that’s really an opportunity for us,” he said. The business computer upgrade cycle overall “is happening, and we expect it to continue to happen,” Klein said, calling it “a great growth engine for us.” Microsoft is “seeing an increased intent to deploy Windows 7 in businesses, so it’s going faster than in previous releases” of Windows, he said.

In thwarting piracy, the industry has made “gradual progress,” Klein said. “It tends to go up and down quarter by quarter, but the general trajectory has been up, although probably more limited in places like China,” he said. Microsoft is “always working on policy issues, and government issues related to the protection of intellectual property, and there seems to be some positive momentum there, but it’s a very complicated thing,” he said.

Earlier at the conference, THQ Chief Financial Officer Paul Pucino said tablet and smartphone games “certainly could” impact pricing for the videogame consoles and handheld systems. But he said, “I think the jury’s out” on that. THQ makes games for all those platforms. THQ kicked off a marketing campaign for its new game, Homefront, on Monday, Pucino said. It will ship March 15 for the PS3 and 360 at $59.99 and PCs at $49.99.

Also launching this week is the uDraw GameTablet in Europe after a strong U.S. launch late last year, Pucino said. “At this point in time, we feel good. There are about 25 million” Wiis that have been in Europe,” he said, calling that “a big number” for the potential uDraw market there. UDraw hardware sales “have fallen off” in the U.S. since the holiday season, but he said sales were “about where we thought we would be since the holiday” and THQ has been “pleased with the sale of software as well” for the device. A total of 75 million Wiis have been sold globally, so “the attach rate” for uDraw “doesn’t have to get very high before these numbers get very interesting” for THQ, he said. If the product continues to “be very successful” for THQ, “it may very well be plausible to give other publishers the ability to make software” for the device, he said. But for now, “our focus will continue to be making software just ourselves” for uDraw, he said. “If there’s been any discussions at all” between THQ and rival third-party publishers, “they've been very preliminary and very premature,” he said.