Sony Cuts to the Chase

Sony (NYSE:SNE) is attempting to shore up market share in the portable device market by reducing the price of its PlayStation Portable, popularly known as the PSP. However, you can't help but think that the stiff competition posed by Motley Fool Stock Advisor pick Nintendo (OTC BB: NTDOY.PK) certainly isn't lost on Sony, although maybe there might be some question if Sony is being aggressive enough.

The Japanese electronics giant is cutting the PSP price by $30 to $169.99. Sony said that its move is meant to increase demand from young users; the AP reported that a Sony spokesman said the number of teens who are using the PSP as their primary handheld entertainment system has been increasing and that it wants to help that trend along by making the price more affordable to such youngsters.

Of course, this strategy underlines the heated competition among the players in this market. When it comes to handheld entertainment, Sony's major competitor is Nintendo, which makes the Game Boy and Nintendo DS handheld gadgets; NPD said in February, the DS outsold the PSP by more than two to one. Furthermore, Nintendo has upped its profile with the very successful launch of its Wii console, which many say has been roping in non-hardcore gamers, unlike those who gravitate toward Sony's PlayStation 3 and Microsoft's (NASDAQ:MSFT) Xbox. These would include younger children as well as teens. I can't help but think the presence of the Wii has something to do with the PSP price cut.

After all, at $250, the Wii is much cheaper than Sony's and Microsoft's high-end consoles. I wonder if part of the decision to cut the PSP's price is because, at $200, some potential buyers (or parents) might be tempted to simply fork over an extra $50 to get a Wii. True, you can't lug a Wii around town, but then again, the Wii has garnered a lot of positive attention here lately. (Note that even with the reduced price, the PSP is still more expensive than the more comparable Nintendo DS handheld.)

Plus, when it comes to mobile gaming and entertainment, there are many options for frittering away time, and I'd say teens generally have at least some of these at their disposal. Apple's (NASDAQ:AAPL) fifth-generation iPods not only have video but also a selection of games, some pre-installed and others available on iTunes. And many cell phones have streaming video and downloadable games available as well.

At any rate, it's an interesting move, as Sony attempts to shore up the PSP. It's also noteworthy given the fact that last quarter, Sony's tepid earnings were negatively hit by the high costs of launching the PlayStation 3. There's some irony in reporting a low-key quarter when you're in the midst of launching a long-awaited next-generation console. Sony's popular PlayStation product line is definitely an important brand, but it seems that this time around, PlayStation faces much more formidable competitive forces than it has in the past.

For related reading, play around with the following Foolish articles:

• Blu-Ray takes the lead.
• Last quarter, Sony was still turning around.
• Some Web surfers and gamers verbally flogged Sony for its fake blog ad campaign.

Nintendo is a Motley Fool Stock Advisor recommendation. Microsoft is a Motley Fool Inside Value pick.  

Alyce Lomax does not own shares of any of the companies mentioned.