Merrill Lynch Update: PS3 BOM Approaches $900

[cthellis42]

Now the PS3 will come out 1 year later than Sony stated, after us finding out that the darn thing cost $900 to make. What else will they say games will cost $70 in stores?

What makes you think they'll lowball like that?

 

[mckmas8808]

i think one of the reasons that made ml to revise their numbers is the reported losses that microsoft is taking with 360. According to earlier ml eastimates, the cost of a 360(premium) system was supposed to be around 340$ , yet ms is selling the system for 399$ and still taking substantial amount of hit per system. Considering ms has said being cost effective was one of the key design priorities with 360 in many different occasions(being more of a bruce lee less of a hulk in their words), and sony in contrast always presented ps3 as this expensive,cutting-edge high-end supercomputer, i can kinda see where these revised(inflated i must say agree) ml numbers are coming from.

Okay but what does MS have to do with Sony? Are they secretly selling the same system?

 

[mckmas8808]

Man this is not looking good for Sony.

Sony's shares fell as much as 4.4% on Monday after Merrill Lynch said in a research note last week that the PS3's launch might be delayed six to 12 months and the cost of production could initially approach $900 per unit.
The shares closed down 3.6% at 5,300 yen, underperforming the Tokyo stock market's electrical machinery index IELEC, which fell 1.85%.
Merrill Lynch also downgraded its rating on Sony to "sell" from "neutral", saying in its note that Sony could see its earnings decline.

"No one is seriously thinking a spring release is realistic any more," said Hiroshi Kamide, an analyst at KBC Securities. "If I were Sony, I wouldn't be that worried about releasing as soon as I possibly could."
Kamide said Sony may wait until it is fully prepared, especially after seeing slow initial sales of Microsoft's Xbox 360 even though it was launched in time for the holidays.

http://www.usatoday.com/tech/gaming/2006-02-20-sony-ps3_x.htm?POE=TECISVA

 

[<nu>faust]

come on mckmass you know what exactly i'm trying to say here. There is a probability of ml realizing their earler projections (340$ for 360, 494$ for ps3) being a little bit on the low side after the reports of ms's substantial losses.

 

[expletive]

Man this is not looking good for Sony.



http://www.usatoday.com/tech/gaming/2006-02-20-sony-ps3_x.htm?POE=TECISVA

Not good at all. Merrill should hope this analysis was based on some credible information becuase now its actually costing people money.

Interesting that in the responses from Sony, which seem directed at this specific ML report, they dont refute the BOM estiamte at all, just the launch date. Not sure if thats significant but made me wonder.

 

[mckmas8808]

come on mckmass you know what exactly i'm trying to say here. There is a probability of ml realizing their earler projections (340$ for 360, 494$ for ps3) being a little bit on the low side after the reports of ms's substantial losses.

I know what you are saying, but come on man. Okay let's say ML was off about the Xbox 360. Why did they raise the cost of the Blu-ray drive from something like $100 to $350? The Blu-ray drive has nothing to do with the X360. And why does the Blu-ray drive and Xbox 360 cost about the same price to make?

I mean darn I know Blu-ray is new but come on.

 

[Bobbler]

Man this is not looking good for Sony.



http://www.usatoday.com/tech/gaming/2006-02-20-sony-ps3_x.htm?POE=TECISVA

Down less than <4% isn't exactly anything to worry about (especially since its only ~2% difference from the average), especially when Sony knows things they don't (like what ML said being hogwash or knowing the actual price it costs them) -- stock will generally reflect things correctly, and if Sony releases in Spring and at an appropriate price it'll show that.

Interesting that in the responses from Sony, which seem directed at this specific ML report, they dont refute the BOM estiamte at all, just the launch date. Not sure if thats significant but made me wonder.

Generally you won't see companies responding to such things, as that is the kind of stuff that is kept secret. I wouldn't expect them to acknowledge the number unless they felt it hurt them them longterm (like, several months).

 

[<nu>faust]

I know what you are saying, but come on man. Okay let's say ML was off about the Xbox 360. Why did they raise the cost of the Blu-ray drive from something like $100 to $350? The Blu-ray drive has nothing to do with the X360. And why does the Blu-ray drive and Xbox 360 cost about the same price to make?
I mean darn I know Blu-ray is new but come on.

i think i couldn't communicate myself clear enough. I am not defendending ML's predictions/analysyses in any way, as you can see in my first post i called their new revised number as "inflated" . What i intended to do in my original post was pointing out one of the possible reasons for ML's "revisons".

 

[expletive]

Generally you won't see companies responding to such things, as that is the kind of stuff that is kept secret. I wouldn't expect them to acknowledge the number unless they felt it hurt them them longterm (like, several months).

Right but you would think they could have thrown in a Cell, RSX, BR, 'yield' or 'manufacturing' quote or two to calm things down (or did IBM do that for them a few weeks back?).

 

[karlotta]

Right but you would think they could have thrown in a Cell, RSX, BR, 'yield' or 'manufacturing' quote or two to calm things down (or did IBM do that for them a few weeks back?).

By saying a spring launch is on, means that they have all in order. No need for anymore. Now the cost issue is different, once a company manger brings up real costs, the cats out of the bag, and they are liable to there shareholders to be accurate.

 

[mckmas8808]

Right but you would think they could have thrown in a Cell, RSX, BR, 'yield' or 'manufacturing' quote or two to calm things down (or did IBM do that for them a few weeks back?).

Why? Why should these companies work on ML's time?

 

[scooby_dooby]

Why? Why should these companies work on ML's time?

To reassure stockholders since this ML paper is directed towards them?

 

[karlotta]

Why? Why should these companies work on ML's time?

other than ML has a 1000 times more cash invested in the world than Sony and can infulence that.. Id think Sony/these companies do the dance.

 

[ROG27]

Gamesindustry.biz has just written an article about ML's report that gives ML's credibility a real kick in the balls:

Click Here

Excerpt:

"The incredibly high cost of the Blu-Ray drive, for example, is an anomaly that can perhaps be explained by the widespread confusion over the difference between a simple Blu-Ray data drive, a technology which is more complex than existing DVD drives but not enormously so, and a home Blu-Ray player or recorder, which must include a variety of expensive video and audio processing hardware which the PS3 already has on-board as part of its core functionality.

Although it remains a possibility that Blu-Ray drives will be expensive to manufacture, hard evidence of this has yet to emerge - and there is widespread scepticism over the incredibly high price points being attached to the technology by many analysts, especially since the PS3 is expected to have a Read-only Blu-Ray drive, and most other Blu-Ray devices for which even tentative price points have been mentioned are more expensive Read-Write devices.

The other component which Osha expects to be incredibly expensive is Cell, with the price for the chip placed at $230 - a factor, he says, of the fact that the die size of the chip is large, and mostly made up of logic circuits rather than the easier to repair memory circuits.

However, his assertion that the chip will be difficult and hence expensive to manufacture is thrown into doubt by comments made by IBM senior vice president William Zeittler earlier this month, when he said that the firm is succeeding in ramping up yields of Cell "faster than on any chip we've done."

In other words, while Merrill Lynch's report has not only impacted Sony's share price today, but has also kicked off a storm in the mainstream media about the status of PS3, some of its basic assumptions appear to be founded on shaky ground - and like all analyst reports dealing with the technical aspects of console manufacture or game development, it deserves to be viewed with a healthy dose of scepticism."

 

[patsu]

Right but you would think they could have thrown in a Cell, RSX, BR, 'yield' or 'manufacturing' quote or two to calm things down (or did IBM do that for them a few weeks back?).

You can only infer "No comment" from their non-action. It'd be cleaner to close this item quickly and not spend too much time on it. They may talk more about their plans later but the only important public info (at this point) is the launch date. The rest are internal affairs.

If a key piece of info is wrong in the report, what does it say about the other info on the same report ?

 

[MrWibble]

To dispute the ML report, assuming they care, Sony would have to give a pretty accurate breakdown themselves. I don't remember any company actually coming out and saying exactly how much of a loss they were making on a bit of hardware at any given moment (certainly not launch), and certainly not in any great detail. It would be tantamount to giving away trade secrets.

The only number we should really care about, is how much it costs for us to buy one. We can be pretty sure that number will be less than it costs to make, but as we can't very well break it up for parts, it's not an investment in that sense. The only valid comparison we can make to influence our purchase is "how much is this thing worth *to me*?" - which is a factor of the games available and specifications (which ought to give an indication of it's future).

 

[dukmahsik]

imagine if sony announces price of 449-499 for ps3 at E3 and then MS announces price drop to 349 for premium and 249 for core

 

[MrWibble]

imagine if sony announces price of 449-499 for ps3 at E3 and then MS announces price drop to 349 for premium and 249 for core

It would be just as imaginary as my Ferrari.

 

[expletive]

The only number we should really care about, is how much it costs for us to buy one. We can be pretty sure that number will be less than it costs to make, but as we can't very well break it up for parts, it's not an investment in that sense. The only valid comparison we can make to influence our purchase is "how much is this thing worth *to me*?" - which is a factor of the games available and specifications (which ought to give an indication of it's future).

This is a good point and underscores why the 'this report is good for perceived value' argument may be wrong.

Regardless of how much a consumer 'thinks' the PS3 costs to make they are going to make their decisions on a few key things: software, features, services, and price. Theyll likely add up the latter three, compare it to the competition, and then factor in price. When all that is done and theyve come to a decision to buy a Rev or 360, i doubt theyll reason "But the PS3 costs more to make so ill get it regardless".

It would be just as imaginary as my Ferrari.).

Nice, which one do you own?

 

[patsu]

This is a good point and underscores why the 'this report is good for perceived value' argument may be wrong.

Regardless of how much a consumer 'thinks' the PS3 costs to make they are going to make their decisions on a few key things: software, features, services, and price. Theyll likely add up the latter three, compare it to the competition, and then factor in price. When all that is done and theyve come to a decision to buy a Rev or 360, i doubt theyll reason "But the PS3 costs more to make so ill get it regardless".

Yes rather than asking "But the PS3 costs more to make so ill get it regardless", consumers typically ask "The PS3 can do this and that for $X dollar more, do I need those ?".

You should also include "brand" (Playstation vs Xbox) in your list of decision points above. This is Sony's greatest trump card, and is what's hurting MS in Japan right now (besides software).