Microsoft Slashes XBox Price to Compete with Playstation 2

Microsoft Corp. will try to jump-start disappointing sales of its X-Box games console – launched on March 14 in Europe – by slashing the product's recommended unit price to 299 euro from 479 euros on April 26 for all European territories.

Hans Stettmeier, Microsoft's chief of operations in Germany, confirmed the move. "People are interested, but the main complaint is the price," he said.

The X-Box's new price will be in line with Sony's pricing strategy for Playstation 2. Sony cut the games console's price at the end of 2001, and was rewarded with a rapid surge in sales.

Sony sold 850,000 units in Germany alone and expects that number to "at least double" in the next 12 months, according to Manfred Gerdes, managing director of Sony Computer Entertainment's German operations.

With 25 million units sold worldwide, Sony leads the global market for games consoles.

Microsoft declined to provide concrete sales figures for the X-Box's Europe launch. But the console's start was widely regarded as rocky, with German retailers offering the product at a big discount to lure buyers.

Sony's Gerdes said two X-Boxes were sold for every one Playstation 2 in the first week of its launch. But by the third week, retailers were again moving 4.4 Playstation 2 units for every one X-Box.

To avoid backlash from its customer base, Microsoft said it plans to offer pre-price cut buyers of the X-Box, who show their receipts, two free X-Box games of their choice and a game controller.

Microsoft's goal is to sell 4.5 to 6 million X-Boxes world-wide by mid-year, but several banks and analysts have already started chipping away at that estimate.