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By Mike Firn and Hiroshi Suzuki
Jan. 22 (Bloomberg) -- Sony Corp., the world's video-game console maker, sold a record number of PlayStation 3 machines in Europe during the holiday shopping season after lowering prices to compete against Nintendo Co.'s Wii.
Sony, which began selling PlayStation 3s in Europe in March, shipped about 1.2 million consoles in the region during the five- week period ended Dec. 31, Kazuo Hirai, president of Sony's game division, said in a Bloomberg Television interview aired today. That's in line with U.S. shipments during the period, he said.
Price cuts and the introduction of a cheaper model helped Sony approach its goal of selling 11 million PlayStation 3s in the year ending March. Still, analysts at Nikko Citigroup Ltd. and Daiwa Institute of Research Ltd. predict the Tokyo-based company will miss the target after being outsold by the Wii and Microsoft Corp.'s Xbox 360.
``It's an industry consensus that PS3 sales will fall short of the target,'' said Mitsuhiro Osawa, a Tokyo-based analyst at Mizuho Investors Securities Co., who rates Sony shares ``outperform.'' ``Sony must think it's okay as long as the game business doesn't drag much on its overall earnings.''
Sony, which generated 12 percent of revenue from the game unit during the three months ended Sept. 30, has posted seven straight quarters of losses at the division.
Higher sales, coupled with lower production costs, will reduce the company's operating losses related to PlayStation 3s by 90 percent to $158 million in the fiscal second half ending March 31, according to Dec. 27 estimates by Nikko Citigroup.
Shares Fall
Sony fell 3.3 percent to 5,310 yen as of 9:16 a.m. on the Tokyo Stock Exchange, contributing to a 14 percent decline this year. The benchmark Nikkei 225 Stock Average dropped 4.1 percent today.
In October, Sony cut prices by 100 euros ($145) in Europe, 17 percent in the U.S. and as much as 10 percent in Japan to compete with the Wii and Xbox 360. The company also introduced a cheaper model, equipped with 40 gigabytes of storage capacity, after removing components that allowed the machine to function with PlayStation 2 games.
``We want to promote games only available for PlayStation 3,'' said Hirai, president of Sony Computer Entertainment Inc. ``The introduction of the 40-gigabyte model is in line with that strategy.''
In November, the PlayStation 3 outsold the Wii for the first time in Japan and almost doubled its market share in the U.S., according to estimates at research firms Enterbrain Inc. and NPD Group Inc. Sony this month said it would discontinue the sale of its two priciest PlayStation 3 models to focus on the cheaper 40- gigabyte machine.
Missing the Target
Sony is expected to sell 8 million PlayStation 3s in the year ending March 31, missing its annual target by 27 percent, Daiwa said in a Jan. 18 report. Nintendo will probably sell 19 million Wii machines and Redmond, Washington-based Microsoft will ship 9.1 million Xbox 360 consoles, according to Daiwa.
``We haven't made any conclusion whether we have to give it up,'' Hirai said, referring to this fiscal year's 11 million shipment target. ``It depends on how aggressively dealers buy our PS3 inventory.''
Chief Financial Officer Nobuyuki Oneda said on Oct. 25 that Sony may miss the goal.
Nintendo's Wii sales will exceed those of Sony's game consoles, including the PlayStation 2, next fiscal year, according to Tokyo-based Daiwa.
Sony failed to sell as many machines as Nintendo and Microsoft in the market for the latest generation of consoles partly because it trailed behind rivals in the ``completeness'' of its lineup of games, Nikko Citigroup analysts Kota Ezawa and Soichiro Fukuda wrote in a Dec. 27 report.
To spur the development of titles, Sony in November slashed by 50 percent the price of a software package used by programmers to develop games in Japan and the U.S.
To contact the reporters on this story: Mike Firn in Tokyo at mfirn@bloomberg.net ; Hiroshi Suzuki in Tokyo at hsuzuki5@bloomberg.net .
Last Updated: January 21, 2008 20:04 EST
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