Sony gets mojo back as PS3 sales pick up

Sony gets mojo back as PS3 sales pick up

By Daniel Rook/ AFP

Tokyo: Things seem to be looking up for Sony. After a tough first year, sales of the PlayStation 3 are finally gaining momentum while the company’s new flat television is reviving its reputation for innovation.

The iconic Japanese company, recovering from a profit slump, is enjoying brisk sales of digital cameras and other electronic goods and expects its operating earnings to soar more than six-fold this year.

Since Howard Stringer, a Welsh-born US citizen, took over in 2005, Sony has axed thousands of jobs, floated its financial arm on the stock market and struck a deal to sell its advanced semiconductor operations to Toshiba.

Even Middle East investors, flush with petrodollars, have taken note, with a Dubai fund recently buying a substantial stake in the group, helping its shares to rocket up 14% over the past week.

Adding fuel to the rally, the company announced that PS3 sales in North America had more than tripled in the crucial Thanksgiving holiday week after a $100 price cut. The icing on the cake came on 30 November when magazine publisher Enterbrain reported that the PS3 video games console had finally outsold Nintendo’s Wii in Japan in November.

The upturn in sales came after Sony cut the price of the PS3 by 10% in Japan and launched a new slimmed-down version, ratcheting up the competition with its rivals ahead of the crucial year-end sales period. A better line-up of games compared with a year ago is also making the PS3 more attractive, analysts said.

Sony is “making up lost ground," said Hiroshi Kamide, an analyst at KBC Securities. “Going forward another 12 months or so I’m sure we’ll see better titles turning up as well. I wouldn’t say Sony’s back on form and everything is going to be ok now but it feels like the proper launch (for the PS3) this year," he said.

Sony put the emphasis on chip power and ultra-realistic graphics for the PS3, but since its release a year ago it has trailed badly behind Nintendo’s cheaper, user-friendly Wii machine that aims to appeal to a wider audience.

Analysts said that although the PS3 might not maintain its lead over the Wii in Japan for long, the company should be able to gradually cut its losses in its game division as it sells more consoles and reduces production costs. “It’s certainly a sign that the momentum of the PS3 business is improving," Macquarie Securities analyst David Gibson said of the recent sales upturn.

“The PS3 and the games business is past the worst in terms of financial losses and the sales momentum is improving because of the price cut and the new model," he said. Sony sold 183,217 PS3s in Japan in the four weeks to 25 November, while Nintendo sold 159,193 Wii consoles, according to Enterbrain.

“The PS3 has already seen the worst and finally you are seeing sales rebounding," said an analyst at an investment bank who asked not to be named. “The fact that you are seeing the PS3 already gaining traction in Japan and also putting a lot of pressure on Nintendo I think is significant," he said.

Sony, which changed the way the world listens to music with the Walkman, is now fighting back after being caught off guard in recent years by innovative new products such as Apple’s iPod and Nintendo’s Wii. The iconic company is trying to regain some of its reputation for cutting edge technology, and this weekend launched the world’s first organic light emitting diode (OLED) television.

By sandwiching a very thin layer of organic material between two plates, the television is said to use less power and offer brighter images and wider viewing angles than liquid crystal display panels.

With the group’s fortunes apparently improving, Dubai International Capital, a fund owned by the oil-rich emirate, announced last week that it had bought a “substantial" stake in Sony without disclosing the value. The purchase “does to some degree confirm that value players see some opportunity in the company and we would agree with the idea that at these prices the shares are attractive," said Macquarie’s Gibson.