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Sony Stock Falls Due To PS3 Concerns

With the PS3 launch looming on the horizon, analysts all over the world are starting to evaluate Sony's position in the marketplace. And so far, it's not exactly an overwhelmlingly positive response.

Today, Sony's share price slipped to 4,600 yen ($38.98), a decline of 130 yen ($1.11) or about 2.75%. It seems apparent that Sony stockholders are getting a bit nervous, and it's likely due to several news reports after two major analysts questioned the PS3's supposed imminent success.

One such analyst, Yuji Fujimori of Goldman Sachs, had this to say-

"We have adopted a cautious view of the impact of the [Sony] game business on the electronics business this term," said Fujimori.

Fujimori further downgraded Sony's rating from "buy" to "neutral," referencing "confusion over the release of PlayStation 3 and concerns [about] disappointing sales of [the] PlayStation Portable," according to statements published earlier by the Associated Press.

In more analyst news from Tokyo, Macquarie Equities' David Gibson got a little more specific, citing a recent - and widespread - problem with the PS3s at TGS. His report outlined how the 200+ consoles on the floor of the Tokyo Game Show "operated erratically and had to be repeatedly reset." (AP)

"While the reason for this is unknown, we suspect it may be due to overheating as a result of enclosing the units and the high temperatures at the venue," said Gibson. "We are concerned that such a problem has occurred so close to full production and is clearly negative news for the company."

Of course, all of this prompted a public response from Sony, but while the official statement does explain (potentially) the reason for the PS3 problems at TGS, it's not quite detailed enough to derail the aforementioned concerns.

In regards to the hardware failures at the show, Sony said this was caused by unusually high temperatures created by having too many consoles operating in close proximity to each other. "It's not a problem with the PlayStation 3 unit itself," Sony spokeswoman Nanako Kato told the AP. "For a normal player at home, there shouldn't be any problem."

Sony has already had some issues on the PS3 front; most notably have been the production problems. They were forced to delay the PS3 launch in Europe, and there's been an inability to manufacture enough Blu-Ray components, which ultimately resulted in drastically cut launch distribution numbers for Japan and the U.S. Sony still promises to ship between 2 and 2.5 million units before year's end, though, and as November 17 gets closer, we could see Sony's stock recover due simply to increased exposure and interest in the general public.

10/3/2006 Ben Dutka

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