Can Microsoft Win Television?

Shares of Microsoft (NASDAQ:MSFT) have been stuck in a trading range of $20-$30 since the year 2000.  The company has been playing catch up against other tech giants such as Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG).  On Monday, Microsoft announced an upgrade for its well-received Xbox Kinect system that will attempt to capitalize on the voice recognition success currently being seen in products like the new iPhone 4S.

Microsoft explained, “With this update, Xbox 360 system owners will experience Kinect voice control integrated with Bing search, making your TV and entertainment experiences more social and personal than ever.”  In other wards, users will be able to use their existing Xbox 360 system with the new Kinect upgrade, to find and control content by voice or even hand commands.  Instead of scrolling through media content on Netflix (NASDAQ:NFLX), ESPN (NYSE:DIS), or Hulu (NASDAQ:CMCSA), the user could simply say “find me Modern Family.”

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While many investors may see this as a move to lure customers away from television companies, investors should keep in mind that Microsoft is working along side of television companies to enhance the at-home media experience.  Customers will still need to subscribe to Xbox Live, Netflix and Hulu to receive content over the Xbox 360.  Television companies such as Time Warner (NYSE:TWC) and DISH Network (NASDAQ:DISH) have done very little in the hardware innovation department.  Microsoft is hoping to fill in this role.  Forrester analyst James McQuivey said, “Microsoft has just built and delivered a single box that ties together all the content you want, made easily accessible through a universal, natural, voice-directed search.” The Xbox 360 has been selling well during the holiday season.  Last week, Microsoft sold about 960,000 units, and 80% of those included Xbox Kinect.

Although Google is the king of internet search, and Apple dominates the mobile market, the television entertainment space is still up for grabs.  Last week, YouTube unveiled a total redesign that plays to the television-style viewer, and promised better integration with Google products.  Apple has offered a set top box for years, but has been unable to fully integrate the television with the internet, yet.

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