pcostabel
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Buisness Week
In our view, PSP will not cannibalize sales from the new PS2 because the former is entering the market for handheld game devices and the latter is leveraging the market of the old home-console model. Once PSP debuts in the U.S. -- which we expect sometime between January and March, 2005 -- we look for total shipments (including Japan) to reach between 5 million and 6 million units. By end of fiscal year 2006, we project shipments of 10 million units worldwide.
Since Sony will go head-to-head with Nintendo, which priced its new handheld gaming device at $136, we do not expect PSP to be priced at more than $200. Consequently, even if Sony sells PSP at the lower end of our projection, it could produce substantial incremental revenues in the second half of the fiscal year 2006.
To get a sense of how much Sony stands to gain from PSP, we estimate that revenues from PSone and PS2 for fiscal year 2004 were approximately $4 billion (Sony doesn't disclose the actual figure, but states that hardware accounts for 50% of total sales from its Games Division). Given the line of exciting software, PSP alone could generate almost half the revenue of PSone and PS2 by the end of fiscal year 2006. We expect margins for PSP to be between 6% and 8%, assuming that Sony has not mastered cost efficiency at that point in the PSP's life cycle