Tokyo: Playstation 2 may well be Sony Corp's biggest gamble in years. The Japanese consumer electronics giant appears ready to make a killing when the Internet-enabled, DVD-playing successor to its hugely popular video game machine hits stores across North America on Thursday. But only if it can make enough of them. The main risk facing Sony right now is a potential inability to produce enough of the $299 machines to meet heavy demand.So far, it has halved planned initial US shipments to 500,000 units and is diverting components from Japan to meet this. "Maybe Sony isn't up to where they want to be because they're reducing shipments just to make that reduced (US) target," ING Barings analyst Ms Lisa Spicer said. Shipments in Japan are suffering as a result, she said, with about 30,000 units going out every week instead of an initial 50,000 to 70,000.
Moreover, software titles - the real heart of the video-game businesses - aren't selling as well either. Usually, two or three titles sell along with a game unit, but users appear content for now with older titles and DVD playback capability.
High stakes
Sony has staked a lot on the game division, called Sony Computer Entertainment, which makes up 30 per cent of profits. With a massive 125 billion yen ($1.16 billion) spent launching PlayStation 2, Sony needs to reach and hopefully surpass its global target of 10 million units by the end of the business year next March 31.
Sony's shares price suffered in September when the company announced the reduced output for the US launch. That sparked some doubts that Sony could reach its target, despite the fact that more than three million units have been shipped so far in Japan.
A million of them were sold in the first week after people lined up for hours on March 4 to buy the PlayStation 2. Critics say there's still slack in the system, which means Sony will have to depend on sales overseas to meet its target. In fact, it hopes to sell 6 million units outside Japan. "They're betting on overseas growth. They need it - Sony is definitely a global company," Ms Spicer said.
Earnings
Sony's July-September earnings will be announced in Japan on Thursday, the same day as the US launch. Analysts are expecting the cost of the PlayStation 2 launch, a strong yen, and weak results at Sony affiliate Aiwa Co Ltd, to weigh on the July-September results and and keep profits mostly flat with last year's 46.52 billion yen ($429.7 million). "The result will be accentuated by strong earnings in the electronics division," Kokusai Securities analyst Mr Hiroyuki Matsumoto said.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.