Microsoft on Tuesday said it will hold firm on pricing for its Xbox 360 game console, defying widespread expectations that it would respond to a price cut by rival Sony for the PlayStation 3.
Instead, Microsoft voiced confidence that a slate of upcoming titles targeting both hard-core and casual gamers would be strong enough to give it the lion's share of consumer dollars in the coming months.
"We have no desire, no need, to react to anything the competition has done," Shane Kim, head of Microsoft Game Studios, said in an interview.
"We feel really great about the Xbox 360 momentum right now. Customers are voting with their wallets; it's not just about console units. We feel great about how we're doing."
On Monday, Sony cut the price of the PlayStation 3, which competes against the Xbox 360, by $100, or 17 percent, in the United States in an effort to boost flagging sales.
That means the machine, which has a 60-gigabyte hard drive and a Blu-ray high-definition DVD player, costs $500, or $20 more than the high-end Xbox 360 Elite that has a 120-gigabyte hard drive but no built-in high-definition DVD player.
Microsoft also has a "premium" Xbox 360 with a 20-gigabyte hard drive that sells for $400, and a "core" version with no hard drive that costs $300.
Sony's cut also came days after Microsoft said the number of broken Xbox 360s was "unacceptable" and that it would book a charge of up to $1.15 billion for repairs and warranty extensions.
Microsoft also said it had shipped 11.6 million consoles worldwide by the end of June, missing its target of 12 million.
In the United States, Microsoft has sold about 5.8 million consoles, compared to 2.8 million for Nintendo's Wii and 1.4 million for the PS3, according to data from NPD Group.
Kim said the decision not to cut prices was unrelated to Microsoft's goal of making the Xbox business profitable in its 2008 fiscal year, which just started.
Since launching the original Xbox in late 2001, Microsoft has spent billions of dollars fighting Sony's dominance in the industry yet has shown little, if any, profit.
"It's really not about meeting the profitability goals. We feel very confident that we'll meet the profit goals with our strategy that is already in place," Kim said.
Kim pointed to a lineup of games coming out later this year, including Microsoft's highly anticipated Halo 3, Grand Theft Auto IV from Take-Two Interactive Software and Madden NFL 08 from Electronic Arts.
"This year, that perfect storm arrives again," Kim said. "And the Xbox 360 is the only platform you'll be able to play all three of those titles on."
Microsoft also hopes to attract more casual gamers with two new casual games for later this year. One is a multiplayer "party game" based on its "Viva Pinata" franchise, and the other is based on the movie trivia board game "Scene It?"
Nintendo's Wii has outsold the Xbox 360 and PS3 this year due to a design and price aimed at drawing in casual gamers.
Kim also said the Xbox Live online service, which allows players to compete online and download movies and games, had 7 million users and would expand to 10 million in one year. He said Walt Disney would start making some of its movies available on the service.
"Xbox Live continues to just be a huge boulder rolling downhill that is gathering momentum," Kim said.