Sony PlayStation losses double


25 Oct 2007

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Japanese electronics giant Sony reported a formidable third quarter profit of US$645.5 million. But the champagne can remain on ice because the company needed such profits to offset the fact that losses at the company’s PlayStation division have more than doubled.

Losses widened because sales trailed those of Nintendo’s cheaper Wii product and analysts believe that CEO Howard Stringer faces a tough challenge trying to revive a company that has lost more than a quarter of its market value in the past year.

In recent months Sony dropped the price of its PlayStation 3 console to (depending on capacity) €399 and €499 but the question is whether the company can turn around fast enough to catch up on the Wii and the also cheaper Xbox 360, bolstered by games like Halo 3 and Bioshock.

Nintendo sold almost three Wii machines for every one PlayStation 3 in Japan.

“This is a bag of mixed results,” said Carl Gressum, senior analyst at Ovum. “On the whole they look better compared to last year.

“First to the ugly details; game [division] reports a top line growth of 42.9pc, which is good, but also disappointing. The key issue for game is the lack of profitability. There are two reasons for this. Software sales are down for the PS2 and the PS3 is a loss maker and Sony seems to build up inventory in the channel for the holiday season.”

“The good news comes from the electronics group, which performs well. This increase in the bottom line contribution stems from internal LSI sales to game as electronics supply components for the PS3. Good to see that someone makes money on the PS3,” Gressum said.

By John Kennedy