What's up with Sony (NYSE:SNE) lately? For the last couple days, rumors have been flying that the company may delay launch of its long-awaited PlayStation 3 game console, and that could certainly spell trouble for the company. The new console is a hot product among the company's recent missteps, and a long delay could certainly give its rivals an edge.
Sony's been a highly watched company lately, considering the fact that the once-mighty consumer electronics giant has dropped a few balls lately. There's the much-publicized fact that its Walkman product lost its rep as the king of music players when Apple (NASDAQ:AAPL) took the crown with the iPod. (Sony's trying to carve out a new niche in digital books, though.) And of course, its rootkit controversy is still fresh in many minds.
On the other hand, even a Sony skeptic like me had to note that the PlayStation line of products has been a major bright spot. The PlayStation is the number one game console. I was surprised to hear that Microsoft (NASDAQ:MSFT) was beating Sony to the punch by releasing the Xbox 360 right in time for the 2005 holiday season, and that Sony's PlayStation 3 was going to be a no-show. However, given recent rumors, it seems PlayStation 3 may arrive even later than that.
Some news reports point out that Sony downplayed PlayStation 3 at the Consumer Electronics Convention in January. Meanwhile, some analysts think PlayStation 3 won't launch here in the U.S. until the 2006 holiday season -- or maybe even later. There's also talk of the high cost to manufacture the product, with one analyst pegging it at $800 per console.
Granted, PlayStation 3 is proposed to have some pretty incredible features, such as inclusion of a Blu-ray high-definition DVD drive. It's supposed to be one of the first devices that will include that next-generation technology, which of course is one of the reasons why the console is so anxiously awaited. In addition, it will include a snazzy microprocessor that is reportedly several times faster than Intel's (NASDAQ:INTC) Pentium 4, another impressive addition.
Sony is standing firm on its past plan to launch the product this spring, which could be somewhere in the April to June timeframe.
I've long wondered about the bullish price pegged on Sony's shares when the company has made some major missteps over the course of recent history. The rumors about PlayStation have helped Sony's shares lose nearly 5% of their value over the last week. Given the fact that Microsoft's Xbox 360 is having a problem meeting demand for the product -- a mixed blessing, of course -- it stands to reason that the longer Sony waits to release PlayStation 3, the more market share it stands to lose to Microsoft and other rivals, casting a shadow on one of its most popular products. It seems to me that investors have good reason to be wary.
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Alyce Lomax does not own shares of any of the companies mentioned.
