It's the moment many console-gaming enthusiasts have been waiting for. As another next-generation box hits stores tomorrow -- or, technically, tonight at midnight -- you can get a feel for what "blockbuster" really means, as lines of patient buyers begin snaking around electronics-retailers' buildings across the country. So let's find out how an investor can benefit from the mania over the next few months.
Electronics-analyst firm iSuppli's latest gadget teardown explains where the parts for the Sony (NYSE:SNE) PlayStation 3 come from, as well as how much of the manufacturing cost goes to each company. Without further ado, here's the lowdown, based on a high-end PS3 with a 60 GB hard drive and built-in wireless networking. At a retail price of $599, the estimated production cost would be $840.35.
|
Supplier |
Component |
Price |
Percentage of Total Price |
|---|---|---|---|
|
NVIDIA (NASDAQ:NVDA) |
Reality Synthesizer |
$129 |
15% |
|
IBM (NYSE:IBM) |
Cell processor |
$89 |
11% |
|
Toshiba |
Emotion Engine, other parts |
$86 |
10% |
|
Seagate Technology (NYSE:STX) |
Hard drive |
$54 |
6% |
|
Samsung |
Memory |
$48 |
6% |
|
International Rectifier (NYSE:IRF) |
Power conversion chips |
$17 |
2% |
|
Marvell (NASDAQ:MRVL) |
Wi-Fi networking |
$16 |
2% |
|
Analog Devices (NYSE:ADI) |
Various components |
$11 |
1% |
My table does not break out manufacturing costs, Sony-branded components such as the $125 Blu-ray drive, and other costs that could not be attributed to any particular supplier. In all, Sony will eat about $306 on each entry-level PS3 sold and $241 per upgraded system.
It's fairly obvious that investors wanting to cash in on the success of PS3 consoles should not reach for Sony today. The company hopes to ship two million boxes by the end of the year, and to at least keep up with the pace of initial Xbox 360 sales. That Microsoft console shipped its five millionth unit on June, seven months after hitting its first store.
At five million shipments, and with the unrealistic assumption that every box is a high-end model, the income produced by the PS3 for these component companies represents about 0.5% of IBM's 2005 sales and 0.8% of Toshiba's. But it's a significant 4.6% of Marvell's total sales and a 7% boost to International Rectifier. However, the real winner here is Stock Advisor selection NVIDIA, because $645 million of extra revenue is 27% of its 2005 revenues. That's something to chew on while playing some hot new games.
Further Foolishness:
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Fool contributor Anders Bylund holds no position in any of the companies discussed here, and his only gaming console is a Dreamcast dinosaur. You can check out Anders' holdingsif you like, and Foolishdisclosure is always worth waiting for.
