Kicker_of_Elves

http://www.gamespot.com/news/6144600.html

Share price sinks 3.6 percent on predictions of $900-per-console manufacturing cost, spring 2007 US launch; contradictory corporate statements follow.

Across the United States, most Americans were relaxing this Monday, courtesy of the long Presidents' Day holiday weekend. Not so across the Pacific in the corporate offices of Sony. The electronics and entertainment giant saw its stock price sink 3.6 percent, dropping to 5,300 yen ($45) per share. The fall affected the entire Tokyo stock market, with the Nikkei index dropping 1.75 percent to 15,437.93 yen ($130.57).

Monday's drop follows a 2.8 percent decline in Sony stock on Friday, after Wall Street stock-brokerage firm Merrill Lynch published a report skeptical of the company's next-generation console plans. It predicted that the launch of the PlayStation 3 console could be delayed by 6 to 12 months from its current spring 2006 window, resulting in an autumn launch in Japan and a late-2006 or early-2007 launch in the US.

"We wrote last November that Sony’s design choices for the PS3 had resulted in an expensive and difficult-to-manufacture product," read the report, "and we think that we're seeing the consequences of those choices play out now. In particular, we think the problem points are the Sony Cell processor and the Blu-ray drive." Merrill Lynch also cited heat-generation issues with PS3 hardware and the far-from-finished state of most games for the platform as factors.

While other analysts have predicted that the PS3 might not hit North America until Q4 2006 or Q1 2007--which would miss the all-important holiday shopping season--Merrill Lynch's stature made many a trader skittish. The fires of unease were fueled further by another component of the report, which predicted that the manufacturing cost of the console could be much higher than previous estimates of around $500 per unit.

"Our updated analysis indicates that the initial bill of [production] materials for PS3 could approach $900," read the report. The report said that the production cost of a single Cell processor will be $230 at launch, with the Blu-ray drive setting Sony back $350 per unit. However, the $900 price tag presumably includes a $100 optional hard drive, as a breakdown of component costs in the report totals just $795.

If the $900 estimate is correct, that means the PS3 would have to sell for around $775-$800 to maintain a $100-$125 per-unit loss similar to that of Microsoft's Xbox 360. If the $795 estimate is correct, the console could sell for around $699--within the range recently forecast by a group of analysts and developers polled by CNN/Money.

Merrill Lynch expects that PS3 production costs will start falling after 2007, when Sony can shift the Cell chip's manufacture from the complex 90nm process to the more cost-effective 65mn process. Scaling Blu-ray to other devices will also bring down the drive's price. Merrill Lynch predicts that the PS3's production cost will fall to $320 in the three years after its launch, by which time the Cell will cost only $60 per unit and the Blu-ray drive only $100 per unit.

In the wake of the report, Sony issued a series of contradictory statements. In Japan, Sony Computer Entertainment spokesperson Kei Sakaguchi flatly denied that there would be any delay to Bloomberg News and other press outlets, saying, "There isn't any change in our plan to release the console in spring 2006."

However, a Sony Computer Entertainment America spokesperson was more cautious when she spoke with USA Today. "We're aiming for spring, but we haven't announced specific regions," she told the daily broadsheet. "We're waiting for [final PS3 specifications] until the last possible minute, but the launch could be pushed back if they're not decided soon."

gimmepilotwings

Hahaha.

If that is correct, this may the the type of "Nintendoesque" fall that may doom Sony.

PixyJunket

Honestly, all this sounds like the same "Nintendo is going the way of Sega!" doom and gloom from people that have no idea what they're talking about. Maybe I'm wrong though.. if what's being reported is true I'd imagine it'd be hurtful to Sony but certainly not detrimental. Maybe some Japanese developers will defect to Nintendo during the chaos but whenever the PS3 comes out it will still be the same Sony vs. MS battle for the narrow mainstream here in the US.

young

um, why do you sound so happy about it?

even though i have gobs and gobs of money and drive fancy cars... wait, i get driven in a large vehicle (not a bus)... if the PS3 costs $700, that's a little expensive.

on the other hand, that report was written by Merrill Lynch... so, be wary of it.

kakihara1

and it will still fly off shelves I want the PS3 to do well but damn that's expensive.

pinata242

Oh please oh please oh please let it be Square-Enix. If DQ and KH moved off the PS3, I'd have no need for one.

joshd2012

You took too long to post this article (dated Feb 20), the markets have already rebounded to their "pre-Merril Lynch" numbers.

Edit: http://abcnews.go.com/Business/wireStory?id=1652296

raven56706

yeah but that newstory has nothing to do with the PS3....


if this monster of a system is that much.... XBOX 360 will then have hit a home run

kakihara1

true, I think the question is how quickly will they be able to get cost down after launch? Dven if it were to launch at $700-800 people will buy them like mad. But they won't sell at that price for too long.

kgrogers1979

Does anyone remember the 3DO? It launched at $700, and it was a massive failure. If Sony has any common sense, they will have learned from 3DO's mistake. Personally, I think the PS3 will launch between $400-$500.

gimmepilotwings

I am not happy about it by any means. I own a PS2 and enjoy a few titles on the platform.

I find it funny because it has been rumored for sometime that the console would retail at around the 360 price, or $499.99 as a max price.

A $799 pricetag is very steep, and if that is the case, you could count me in as one of the games that will not get one for 5+ years at least. A pricecut for a $799 machine would be, $699, $650 maybe?...., still WAY too expensive for me. The 360 and its $400 pricetag is too steep for me, and ALOT of other gamers out there.

Michael Corvin

But will it still sell like mad seeing that the graphics are barely a step above the 360? Toss in a 360 price drop and a third console vying for consumers money around launch and Sony is in for a world of hurt if they launched that expensive.

It would all become about loyalty. How loyal are people going to be to Sony when they can get an equally powerful 360(with a kick ass online system) for half the cost or even pick up a Revolution for a quarter of the cost? Consumer sees both on the shelf... hmmm... for about $700 I could get a 360 and around 7 games(with a years worth of titles already) or a PS3 with no games?

pinata242

Or a Revolution with every game on the platform to-date and everything available on the virtual console

nodeerforamonth

Hell, if the PS3 isn't going to be out this year (at a reasonable price), I'll probably break down and get a 360. That is, IF I can find one.

kakihara1

I'm banking on true Sony Die Hards buying them right away, but as soon as that need is filled they will sit and wait on the price drop.

gimmepilotwings

...You an also add 3 more controllers and still have $200 to spend on other stuff.

Kicker_of_Elves

Considering the info i thought was the most interesting to read was the stuff i bolded, i don't really give a shit if the stock prices are back to normal. So keep on laughing chucklehead cause i'm still going at those rumored prices.

joshd2012

Anyone who bites into the speculation can enjoy the rollercoaster. For those of us who know this is bullshit, we get to sit back and enjoy the show.

darkside

I think Sony will be fine and they will have to price the PS3 at the same level as the 360 if they really hope to sell any of these in the US. They may get away with $500+ consoles in Japan though. Sony is paying the price for exagerating so much over the years about their hardware. I think that is way everyone is so quick to doubt them. There are rumors flying everywhere that the PS3 games are going to look just like Xbox360 games and if that turns out to be true the PS3 might have a rough start in the US, especially if the thing is $500.

Problem is its still way too early to know. After E3 we can have a basis to know what the PS3 is going to be capable of and maybe a better idea how much the thing will cost and when its going to really get released.

sracer

Absolutely. Yes, even if the launch price for the PS3 is $700 and doesn't debut until 2007, they will sell out all stock on release day. Many will be gamers, the remainder will be eBay speculators. I suspect that the frenzy will last well into the next shipment to retail outlets. Then it will be an "emperor's new clothes" scenario where to justify the expense they perpetuate the "must-have" hype.

Except for automobiles, I've never seen blind consumer loyalty stronger than for Sony products. And Sony knows it.

Kicker_of_Elves

How do ya know it's bullshit though?

Josh H

I agree. They have too much riding on it to fuck it up, with it being a way to help bluray win, in addition to the playstation division being their biggest cash cow (or one of them anyway).

joshd2012

For the same reason that the $400 PSP price estimate was bullshit. If history has taught us anything, it has shown that analysts have absolutely no fucking idea when it comes to videogaming.

Though I would like to know how their estimates went from $499 to $699 in nine months.

Flay

Wasn't it due to complete lack of information on the cost of the Cell processor and limited info on Blu-Ray?

joshd2012

Nothing has changed. Sony/IBM/Toshiba still haven't disclosed how much each chip costs. I'll have to see if anything has been said about manufacturing of Blu-Ray drives.