Xbox 360 Slim? Analysts Weigh In

Michael Pachter, Wedbush Morgan

"I don't think so.  They had a redesign to eliminate the RROD issue, changed the heat sink, fan and a couple of other components.  I'm not sure that they need to redesign the box, although I see the Elite black box becoming the standard."

Jesse Divnich, EEDAR 

"Any reduction in the physical size of a console certainly adds a lot of financial benefits to the manufacturer. A reduced size decreases shipping costs, packaging material, and increases retail shelve space. There are costs, however, such as the cost to re-engineer a new console as well as the cost to modifying the manufacturing process. If the distribution benefits outweigh the costs, Microsoft should (and likely will) one day release a smaller Xbox 360 unit.

"From a reliability stand-point, a smaller console won't necessarily decrease the Xbox 360 failure rate. Microsoft's failure rate problem is an independent issue that could be (and likely has been) solved without physically altering the size of their Xbox 360 unit. However, a new Xbox 360 unit that is smaller and promises higher reliability certainly makes for a good advertising campaign. In fact, most consumers distrust large organizations, and even if Microsoft did not redesign the physical size of the Xbox 360 but claimed higher reliability, many consumers may still remain leery of the Xbox 360's reliability. However, throw in some physical alterations to the design of the Xbox 360 (i.e. making it smaller) and consumers are more likely to believe that their new Xbox 360 is 'more reliable.' Consumers are more apt to believe a change has occurred if they can physically see a difference, even if the physical difference (in this case, the size of the Xbox 360) has nothing to do with the failure rate of the console.

"In fact, it's a common strategy. Insurance giant AIG is now known as AIU Holdings; Philip Morris, the tobacco giant, is now the Altria Group Inc; Blackwater, a private security firm, is now simply known as Xe. Their credibility among the public increases, even though in some cases, their business strategies remained the same."

Colin Sebastian, Lazard Capital Markets

"I believe Microsoft has been making periodic hardware upgrades to the Xbox 360 since launch.  Based on market share, the Xbox pricing strtegy has driven sales, particularly on the Arcade version.  Going forward, I would expect them to focus on shifting the sales mix towards versions of the Xbox with hard drives.  This would be preferable for both game developers, who have more flexibility when the consoles have local storage capacity, and also the Xbox Live service, in order to drive increasing usage of content downloads."