By Chris Katje
Technology giant Microsoft Corp (NASDAQ: MSFT) has grown over the years thanks to new products, acquisitions and growth of its key operating segments.
In 2001, the company unveiled the Xbox gaming console that would take on rival companies and also provide additional revenue for the company.
Here’s a look at how well investors have done if they managed to grab Microsoft shares when the Xbox was released.
The Xbox was unveiled by the company in January 2001 by wrestler and actor Dwayne “The Rock” Johnson, who told an audience that the gaming console would be successful for many years to come.
On Nov. 15, 2001, the Xbox console was released and became an immediate favorite for gamers.
The introduction of the Xbox put Microsoft in a battle with Sony Group Corp (NYSE: SONY) and Nintendo Co (OTC: NTDOY) for hardware and software revenue by video gamers.
Microsoft has invested in acquisitions in the gaming space and its Xbox Live service gets a recurring revenue stream from subscribers.
The original Xbox sold more than 24 million copies and was considered a modest hit for the company. The Xbox 360 released in 2005 fared much better with over 80 million units sold. The latest units in the console series are the Xbox Series S and Xbox Series X, which were released in 2020.
In the fourth quarter, Microsoft reported mixed results for the Xbox gaming division with hardware revenue down 13% year-over-year and Xbox content and services revenue up 5% year-over-year.
Microsoft reported a record fourth quarter for monthly active users and Xbox Game Pass revenue. The company saw the number of hours played up 22% year-over-year.
Going forward, Microsoft continues to work on closing the acquisition of video game giant Activision Blizzard (NASDAQ: ATVI), the owner of the Call of Duty, Diablo, World of Warcraft, Candy Crush and more franchises.
Microsoft sees gaming revenue growing in the mid-single digits going forward.
Investing $1,000 in Microsoft Stock: Investors who thought the Xbox was going to be a hit for Microsoft could have purchased shares of the technology giant in 2001.
An investment of $1,000 in Microsoft stock on Nov. 15, 2001, could have bought 15.12 shares of MSFT. A 2-for-one stock split occurring in 2003 would have made the hypothetical purchase 30.24 shares.
Based on a share price of $335.31 for Microsoft at the time of writing, the $1,000 investment in Microsoft would be worth $10,139.77 today. This represents a hypothetical return of 914%.
For comparison, the same $1,000 invested in the SPDR S&P 500 ETF (NYSE: SPY), which tracks the S&P 500 broader market index, would be worth $4,020.90. This represents a hypothetical return of 302% over the same time period.
Another comparison saw the same $1,000 worth $2,082.69 today if the investor put the money into Playstation console maker Sony instead. The hypothetical return of 108.3% in Sony stock over the same time period significantly trails the return of Microsoft, the owner of the Xbox console.
The returns do not include dividends paid along the way.
Not a bad return for having conviction in a video game console becoming a hit.
Produced in association with Benzinga