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Microsoft Corporation (NASDAQ:MSFT) Xbox One X Is a Beautiful Surrender

Sony Corp (NYSE:SNE) Xbox

Microsoft Corporation turned what should have been one of the biggest moments in gaming history into a moribund reflection of its place in the industry on Sunday, June 11 as it took to the stage at E3 to show off its new console, dubbed the Xbox One X.

Sony Corp (NYSE:SNE) Xbox

The gaming press consensus boasts about the quality of the hardware. It’s the most powerful console ever released, the price at $499 isn’t all that bad given what’s on offer, and the machine itself is a beautifully engineered technological masterpiece. Behind that consensus, however, a darker one is brewing. Shares in the Redmond, Washington company are set to fall sharply on Monday morning.

Xbox One X games desert at Microsoft Corporation (MSFT)

Phil Spencer, the head of the Xbox One division at Microsoft Corporation , is very clear about his focus at the firm. The executive has claimed on many occasions that Microsoft was investing heavily in new first party titles. With the launch of the Xbox One X fans were expecting to see this investment come to fruition. Those expectations were fanned by a pre-E3 marketing campaign which claimed Microsoft had 22 exclusive games on the slate.

With all said and done however, Microsoft’s game offering was a mirage. It’s not clear where the firm is investing all of Mr. Spencer’s money. The only major AAA style title on offer will be racing simulator Forza Motorsport 7. That, like the rest of the Xbox One X line up, will be available to purchase on PC as soon as it’s released.

Games, or at least exclusives, are not there on the Xbox One X. Microsoft has not built anything to show off the power of its new console. What then is the firm’s strategy for the future?

Microsoft Corporation (MSFT) Is Pushing PC and Xbox One X together

Phil Spencer, in announcing the fastest hardware in console history, really announced the irrelevance of the console. The Xbox division at Microsoft Corporation is behind Sony Corporation  in sales, and with the Xbox One X it’s likely to stay that way.

Microsoft will, instead of competing on exclusives and pushing back against Sony, focus on making access to its games library easier, thereby broadening the market. Phil Spencer, while speaking at times about huge investments in first party games, has been speaking about a Netflix Inc.  style Xbox service for gaming.

With the release of the Xbox One X Microsoft Corporation is fully integrating its PC and console gaming strategies. The new elite version of its home system is really just a highly optimized PC. It’s powerful, and it’s sure to be a hit with a certain subgroup of gamers. What the firm is focused on, however, is its place as a PC at the center of the living room. That’s a dream those in the Xbox division have had since it was opened. It’s not clear how the new strategy will work. Microsoft Corporation hides its gaming numbers, making it difficult for market analysts to find out.

What it won’t do, however, is compete with the Sony Corporation PS4 Pro on anything like an even footing. The Xbox One X is a clear statement on that front. It’s beautiful, powerful and attractive, but it’s just not in the same exact market as Sony anymore. The Japanese gaming giant will show off its exclusives at E3 on Monday June 12th. With that show, Microsoft’s surrender on that front of the gaming war will be clear.

Update

Update 12:33 EST: Wedbush Securities Analyst Michael Pachter, one of Wall Street’s most experienced video game analysts, is very downbeat on the future of the Xbox One X. He said, in an interview after the conference, that the $499 price tag is too high. Mr. Pachter said the console was a hard sell because its price is the same as a combined PS4 + Xbox One S package.

Despite that the Wedbush analyst was, like much of the tech world, upbeat on the hardware. Because Microsoft Corporation is making sure that all Xbox One X titles play on the Xbox One, however, the value proposition is not there. According to Mr. Pachter it would be a surprise if even 20 percent of Xbox units were Xbox One X units. That puts a damper on Microsoft ahead of its rivals conference on Monday.

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