Sony may not meet lowered PlayStation 3 targets after all

[Kyubito]

10/20/2006 12:43:16 PM, by Eric Bangeman

Launch supplies of the PlayStation 3 may be even tighter than expected, as Sony again warns that production issues may keep it from hitting its revised target of 2 million PS3 shipments by the end of this calendar year. Last month, Sony cut its original 2006 calendar target of 4 million PS3s in half, while pledging to meet its original 6 million target by the end of March 2007.

Sony's revised plans included having 100,000 consoles available for the November 11 launch in Japan and another 400,000 for the North American launch six days later, but with production problems continuing, those targets could be difficult to meet.

Those pesky blue laser diodes used in the Blu-ray player were the cause of last month's announcement. At the time, Sony Computer Entertainment president Ken Kutaragi said that the issues had set PS3 production back by a month. "Clearly, we've had production issues," Jack Tretton, co-chairman of SCE America, told Bloomberg yesterday, indicating that the problems continue. When asked about the companies plans to ship 2 million units by the close of this year, Tretton said "the honest answer is it's more of a target." His comments suggest to us that Sony is not yet certain enough to commit to meeting 2 million units by the close of year.

It's grim news for those gamers who swarmed GameStop and EB Games outlets across the country last week when preorders began. Store allocations ranged between five and 20 consoles, and the chain went through its entire, nationwide allocation in a matter of hours.

Yesterday, Sony lowered its earnings forecast for FY2006 by ¥80 billion. The company cited two factors driving the lowered forecast: charges incurred by its notebook battery woes—which have resulted in the recall of around 9.6 million batteries from just about every major computer manufacturer—and console-related costs.

If there's an upside to all of this, it's that Sony will eventually get its production difficulties squared away, and at some point in 2007—hopefully early 2007—PlayStation 3s will begin rolling off the assembly line in volume. Until then, expect supplies to be even tighter and be prepared for some long lines and angry gamers. At least we won't have to worry about eBay profiteering this time around.

[Kyubito]

Sony May Not Meet PlayStation 3 Shipment Targets (Update2)

By Michael White

Oct. 20 (Bloomberg) -- Sony Corp., which slashed its profit forecast yesterday, said it may not reach this year's shipment target for the PlayStation 3 game console because of a parts shortage in the Blu-ray high-definition disc drive.

Sony plans to ship two million PlayStation 3 players this year to the U.S. and Japan, and six million worldwide by March. The Tokyo-based company said yesterday annual profit would fall 35 percent to its lowest in five years on price cuts of the console in Japan and a recall of 9.6 million computer batteries.

``The honest answer is it's more of a target'' for PlayStation 3 shipments, Jack Tretton, co-chairman of Sony Computer Entertainment America, said yesterday in an interview. ``Clearly we've had production issues.''

A shortage of the PlayStation 3 would give Microsoft Corp. and Nintendo Co. a bigger head start in the $20 billion console market when they sell their players next month in time for the year's biggest sales season. Sony cut the price of the PS3 in Japan after consumers complained it was too expensive compared with Microsoft's Xbox 360 and Nintendo's Wii.

``It would be a big hill to climb with a console that costs twice as much,'' said John Broady, an analyst for GameSpot.com, a unit of Cnet Networks Entertainment that tracks video-game sales. ``A lot of this is driven by mothers. When they look at their budget, I think the Wii is going to be very attractive.''

Shares of Sony fell as much as 1.7 percent to 4,710 yen as of 2:30 p.m. on the Tokyo Stock Exchange, against a 0.5 percent advance in the benchmark Nikkei 225 Stock Average.

Laser Parts

Nanako Kato, Sony Computer's spokeswoman in Tokyo, said the company hasn't changed its PlayStation 3 shipment targets.

Sony said in September that it would cut the 2006 rollout for the PlayStation 3 from four million to two million units and delayed the console's European introduction four months. The company said at the time it still expected to reach its original target of six million units by March.

The PlayStation 3 will retail for at least $500, while a basic Xbox 360 model from Microsoft sells for $300. Nintendo is releasing its Wii console at $250.

The company said at the time it couldn't make enough blue diode lasers, the key components of the Blu-ray player. A Blu-ray disc can store at least five times more than the 4.7 gigabyte standard DVD, enabling high-definition game graphics and movies.

``While they may have great engineering, producing it actually takes a lot of time and more money than was initially expected,'' said Pascal Masse, a director at the Japanese unit of Aberdeen Management Asia Ltd., which oversees about $2 billion of Japanese equities.

Earnings Outlook

Net income for the year ending March 31 will decline to 80 billion yen ($675 million) from a year earlier, Sony said. Losses at the game division will be wider than Sony expected because of the PlayStation 3 price cut and slower sales of the PlayStation Portable. About 60 billion yen of operating profit will be erased from the division, the company said.

Tretton spoke in an interview at Sony's ``Gamers Day,'' an event in San Francisco designed to showcase PlayStation 3's capabilities. Sony will release more than 20 game titles for the console during the holiday season. Titles include ``Resistance: Fall of Man'' and ``Genji: Days of the Blade.''

Publishers including Electronic Arts Inc. and Activision Inc., the two largest makers of video games, are developing titles for the PlayStation 3.

Microsoft has shipped 5 million Xbox 360 consoles since it was introduced in November 2005 and expects to sell 10 million by the end of the year, said spokeswoman Molly O'Donnell. Nintendo plans to sell 4 million units of the Wii by year's end, the company said in September.