Sony postpones PlayStation 3 release

Ken Kutaragi, the head of Sony’s video games division, made the announcement at a hastily called news conference after reports of the delay surfaced in the business daily Nihon Keizai Shimbun and other papers. The PlayStation 3 is critical for Sony Corp (NYSE:SNE – news).’s profits and brand image, so the delay is a major setback for the Japanese electronics and entertainment company as it struggles to mount a recovery after several years of poor earnings. The reports sent Sony’s stock tumbling 1.8 percent to 5,470 yen (US$46) on Wednesday. Kutaragi announced the decision after the close of the Tokyo Stock Exchange. In the United States, however, Sony’s American depositary shares rose as much as 2.2 percent and were recently up 34 cents at $46.85 on the New York Stock Exchange, off a four-year high of about $51 from late January. US analysts said Sony’s announcement likely alleviated investors’ concerns that the PlayStation 3 wouldn’t reach the US marketplace until 2007. The new timeline means that the PlayStation 3 will hit store shelves simultaneously in Japan, North America and Europe, just in time for Christmas. “We believe the news will come as a relief to investors who had feared that Sony would not launch the console in Japan until November, followed by a typical four- to five-month lag into the US market,” Brendan McCabe of CIBC World Markets wrote in a research note. Kutaragi said Sony is still trying to finalise the copyright protection technology and other standards for the Blu-ray DVD disc, the format for PlayStation 3, and next-generation video for the company’s electronics gadgets in the works. “I’d like to apologise for the delay,” Kutaragi said at a Tokyo hotel. “I have been cautious because many people in various areas are banking on the potential of the next-generation DVD.” Blu-ray preparations were initially to have been completed by last September, but now won’t be finalised until next month, he said. The delay comes at a time when competition in next-generation game consoles is heating up with US software maker Microsoft Corp. already putting the Xbox 360 on sale last year. Nintendo Co., the Japanese manufacture of Game Boy machines and Pokemon and Super Mario game software, is also planning its version called Revolution later this year. The PlayStation series is now the dominant brand for home consoles, helping support Sony’s bottom line in recent years, and controlling about 60 percent of the global market, according to Kutaragi. Sony has shipped nearly 204 million machines worldwide when combining shipments for the original PlayStation and its upgrade PlayStation 2. Toshiaki Nishimura, analyst for Yasuda Asset Management Co., said the delay is likely to hurt game revenue for Sony, but the announcement wasn’t a big surprise for the market, which had anticipated a delay. Speculation about a possible delay had been growing in the last few months. But further delays that could force Sony to miss Christmas entirely would be detrimental, he said. In a research note, Merrill Lynch analyst Hitoshi Kuriyama said Sony “still has a number of obstacles to surmount before it can achieve a simultaneous global launch of PS3 in November. We will need to keep close tabs on whether any further delays emerge because postponing the launch will worsen the company’s competitive position.” Nonetheless, Nishimura said, “Sony is merely at the starting point of a race.” He said more time is needed to assess PlayStation 3 and the advanced gadgets that will run on the same computer chip called “cell” that Sony is developing. ‘

March 2006
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