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Sony Playstation loses to Wii consoles

Sony Playstation loses to Wii consoles
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First Published: Thu, Feb 01 2007. 03 11 AM IST
Updated: Thu, Feb 01 2007. 03 11 AM IST
Sony Corp., the world’s largest maker of video-game players, said losses at its PlayStation unit will exceed an October forecast of 200 billion yen ($1.6 billion) this fiscal year because of price cuts to fend off Nintendo Co.’s Wii.
The loss for the year ending March 31 will be less than 250 billion yen, Takao Yuhara, head of investor relations, told reporters in Tokyo today. The business will probably break even the following year, he said.
The comments reinforce concerns over Sony’s flagship console, whose sales have lagged behind the Wii since the PlayStation 3’s debut in November. Chief Executive Officer Howard Stringer has called the console one of Sony’s “champion products” that will be an earnings driver for the electronics company.
The PlayStation 3 launch “has turned out to be worse than even our pessimistic scenario,” Merrill Lynch & Co. analyst Hitoshi Kuriyama wrote in a note yesterday. The console “emerges as a key concern” for earnings growth next year, said the Tokyo- based analyst, who recommends investors sell Sony shares.
Sony yesterday reported a 5.3 percent decline in third- quarter net income to 159.9 billion yen. The result was better than analysts estimated because a weaker yen and sales of Bravia flat-screen televisions helped offset the loss in games.
“We hope the PlayStation 3 business will turn to a profit in the fiscal second-half next year as initial costs will decrease,” Chief Financial Officer Nobuyuki Oneda said yesterday.
Shares of Sony fell for a third day, declining 1.4 percent to close at 5,550 yen in Tokyo. The stock has gained 6.1 percent in the past six months, compared with the 13 percent gain by the Nikkei 225 Stock Average.
Games Earnings
The game division, Sony’s second-largest by revenue, lost 54.2 billion yen in the quarter ended Dec. 31, compared with a profit of 67.8 billion yen a year earlier. Analysts predicted a loss of 50.9 billion yen.
Costs associated with the launch of the PlayStation 3, including air transportation expenses, and slower-than-expected sales of the PlayStation Portable were the main reasons for the loss, the company said yesterday.
Sony also had to cut the price of the PlayStation 3 in Japan after consumers there complained the player was too expensive compared with players from Nintendo and Microsoft Corp.
In the U.S. and Japan, Kyoto-based Nintendo’s Wii is outselling the PlayStation 3 by about 2-to-1.
Kyoto-based Nintendo, the world’s largest handheld game maker, last week reported profit in its latest quarter jumped 40 percent to 77.6 billion yen, fueled by demand for Wii consoles and portable DS game players.
Separately, prices of liquid-crystal display televisions will probably fall about 30 percent this year, same as the previous year, Yuhara said.
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First Published: Thu, Feb 01 2007. 03 11 AM IST
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