Analysts mixed over Sony PS3 delay
Merrill estimates cost of manufacturing system at $800
By Scott Banerjee, MarketWatch
Last Update: 3:15 PM ET Feb 21, 2006
SAN FRANCISCO (MarketWatch) -- A downgrade of Sony Corp. and a flurry of analysts' comments are raising further questions over whether the company's forthcoming PlayStation 3 video-game console will miss the all-important holiday launch window in the United States.
Merrill Lynch electronics analyst Hitoshi Kuriyama wrote Thursday that the PS3 launch could be delayed anywhere from six to 12 months, with the result being an autumn launch in Japan and a late 2006 or early 2007 launch in the United States.
In addition, Goldman Sachs analyst Yuji Fujimori wrote Monday that as long as the launch takes place in time for Christmas 2006, a delay is not necessarily a negative, and that any share price decline presents an opportunity to buy on weakness.
In January, MarketWatch wrote about the possible delay as Sony downplayed the PS3 at the Consumer Electronics Show held in Las Vegas. See related story, "PlayStation 3 launch date in question."
Most U.S.-based video-game publishers, however, have said in their most recent series of earnings calls that a holiday 2006 launch is more likely. See quarterly earnings report for Electronic Arts.
A Sony representative said that the company is standing by its "spring 2006" launch period. Sony's U.S.-traded shares were last off 0.8% to $45.64, and have lost 8% of their value since closing at $49.80 last Tuesday.
Merrill on Thursday downgraded Sony shares to sell from neutral, focusing in part on the high manufacturing costs for building the new machine. A Friday note from Merrill semiconductor analyst Joe Osha estimated that the initial bill of materials for the "expensive and difficult-to-manufacture" PS3 could total $800, with costs falling to $320 three years from launch.
With analysts expect the PS3 to sell at around $400, Merrill Lynch said that Sony might consider delaying the release until it can reduce manufacturing costs further in 2007.
Although Sony dominates the global market for video-game hardware, it currently lags Microsoft Corp. in the battle for next-generation consoles. Microsoft launched its Xbox 360 console on Nov. 22 in the United States and sold 1.5 million units globally during its most recent quarter; the company maintains it will ship 4.5 million to 5.5 million systems for the entire fiscal year ending June 30. See Microsoft earnings report. Also see archived story on Xbox 360 launch.
In January, Evan Wilson of Pacific Crest Securities said "the most likely scenario" is that PS3 will be released in Japan this summer with about 1 million units, and in America in November with 1 million units, followed by a European launch in March 2007.
Later in the same month, Prudential analyst Brent Thill wrote: "We think the news may come at two large Sony-specific conferences early in March taking place in the same week -- Destination PlayStation, from Feb. 27 to March 3, and DevStation, a PS3 developers conference, from March 1 to March 2 in London."
Thill thinks that Sony will launch PS3 in Japan this June or July, in North America in November and Europe in early 2007.
