Merrill Lynch's Next-Gen console prediction

[Sis]

Well yeah, the $5 prices don't bother me so much, but the blu-ray, RSX, Xenos, and XeCPU *all* at $100 - that does bother me. Not to mention, yes that Cell price seems *way* too high. Just incredibly high. It's almost as ridiculous to the opposite extreme as that analyst report a while back saying they'd be able to fab them at $20 or something.

Not to mention, the fab and R&D costs shouldnt be factored in to the price. Those should go on the books as assets on Sony's balance sheet and not play a role in a BOC analysis.

Xb, do you expect the PS3 to cost the equivelent price to manufacture as the Xbox 360?

.Sis

 

[Inane_Dork]

It seems that a lot of the presumptions are agreed upon but the extrapolations are arguable. Well, that seems reasonable to me. I look forward to seeing how the Core SKU sells over time, and I'm sure Sony will be looking at that too.

 

[Carl B]

Xb, do you expect the PS3 to cost the equivelent price to manufacture as the Xbox 360?

.Sis

What I think - is that some of the 360 costs may be too high, and some of the PS3 costs are *way* too high. Those are my thoughts on it.

I may be wrong, who knows. But ML's numbers wreak of 'mystery math.'

I expect the 360 to cost less to manufacture due to the lack of XDR (sure, $10 why not), the lack of blu-ray (even $25 for the 360's drive is too much for god's sake), the smaller XeCPU die area, and the dual-die nature of the Xenos; not to mention lessened I/O complexity (no bluetooth, non-native b/g/a, less A/V interface options).

 

[mckmas8808]

Avaya has stated the obvious: a game console is not a typical CE. But are you then suggesting the analysts do nothing? That they say, "Whelp, folks, Sony will ownzered everyone cause of the games!"?

In the end, doing a cost analysis is completely reasonable. The problem is that it does not encroach on the emotional aspect of video gaming and therefore misses probalby the largest factor in the battle. This is what I took avaya to mean when he said "The analysis is actually treating the PS3 as a standard CE product" and it was this statement directly that I mean "good post".

Tell me again, though, mckmas, what is it that you disagree with in the article? You need to counter their claims and not just a single one. They say Sony will price the PS3 at cost in order to avoid losses, you say, "No way! Loss leader! PSP!" but you don't respond then to their basis for that claim, which is that they believe the CEO of the company has given guidance stating that they will not take heavy losses into 2007.

I don't know why Stringer gave this kind of guidance, given the launch of a new system could cost a lot of money. But if he did say it, and the PS3 COGS is around $500, then you need to explain why you believe it will release less than that and still somehow be profitable.

Otherwise, your argument boils down to "nuh-uh!".

.Sis

Ok.

1. Me and you think alike with what avaya posted. So we are on the same page with that.

2. Sis the PS2 didn't take 4 years to recoupe the money lossed on that system. Analysts thought that system would be $400-$500. It think Sony lost money for about 18 months. Videogame, Blu-ray movie sells, controllers, increased amount of memory stick pro duos, possible increase of Sony:Connect downloads for movies and music, and etc. is what will offset the price for the PS3.

There are more possibilities for the PS3 to recoupe the loss wages per say than what the PS2 had. Just imagine the possibilities.

 

[BTOA]

What I think - is that some of the 360 costs may be too high, and some of the PS3 costs are *way* too high. Those are my thoughts on it.

I may be wrong, who knows. But ML's numbers wreak of 'mystery math.'

Deadmeat math?

 

[Sis]

What I think - is that some of the 360 costs may be too high, and some of the PS3 costs are *way* too high. Those are my thoughts on it.

I may be wrong, who knows. But ML's numbers wreak of 'mystery math.'

But the overall point is that the Xbox 360 as designed will give MS a better cost flexibility. This is a strength of the system and a weakness for the PS3. Whether they are high by $75 is largely irrelevent, unless someone were trying to come up to some flawed calculation. But as an illustration, it shows a weakness on the PS3.

.Sis

 

[Carl B]

Deadmeat math?

He was talking about getting a new job, right?

 

[Inane_Dork]

imagine if premium came in at 299 next year and ps3 debuts at 399 or 450

I don't think MS wants to project the image that the X360 is worth so little compared to the PS3. Instead, I bet they would pack in a couple launch games and increase value that way. The Core SKU will be the one that gets price cut as soon as possible.

 

[Carl B]

But the overall point is that the Xbox 360 as designed will give MS a better cost flexibility. This is a strength of the system and a weakness for the PS3. Whether they are high by $75 is largely irrelevent, unless someone were trying to come up to some flawed calculation. But as an illustration, it shows a weakness on the PS3.

.Sis

You know what, and I don't even disagree with that premise. It's true, the 360 should offer MS more budge room than the PS3 will offer Sony. And I agree MS has every avenue to be more aggressive with pricing. It's just Merrill's reports that rub me the wrong way, not the premise.

PS - I edited the post of mine you quoted to be a little more expansive on the price differences I see in 360's favor.

 

[scooby_dooby]

If you are inferring that Merrill's language of 'HDD-enabled' means they are simply talking of an xbox 360 capable of using a HDD, because of the way it is phrased that would mean the alternative is to say 'HDD-disabled' or a unit which cannot support a HDD.

Nope. The options are HDD-enabled and HDD-equipped if you take a look at the language used in their report.

I agree HDD-enabled is redundant, as I said in my first post "isn't every X360 hdd-enabled?" However just because it's redundant, doesn't change the meaning of the word 'enabled'

The X360 is also IPOD enabled, and PSP enabled, it doesn't mean it coems bundled with the system.

 

[Sis]

2. Sis the PS2 didn't take 4 years to recoupe the money lossed on that system. Analysts thought that system would be $400-$500. It think Sony lost money for about 18 months.

But this is exactly what I'm saying: that according to the ML report, the CEO has indicated they won't take heavy losses going into 2007. Whether this is accurate or not, I don't know, but if it is, how can you suggest then that they go ahead and lose money for 18 months?

Instead of debating the merits of a loss leader approach--which I'm fairly certain all of us on this board understand--I would suggest instead you find a rebuttal to the Howard Stringer financial guidance.

.Sis

 

[mckmas8808]

i would thank that Merill Lynch which IS the largest financial management and advisory company in the world with financial analysers who have done thier degrees in esteemed colleges around the world would have more knowledge about cost and estimates and wont release FUD to investors. thier investors depend on them to know where they need to invest and where to sell thier shares. I assume none in beyond3d or any gaming forum would know more about cost and finances than these professionals.

Well what about Sony? Does this make ML 80%, 90%, 100% correct? Read what people like xbdestroya types. This guys understands the business.

 

[Carl B]

I mean for crying out loud - $25 for the 360's DVD-ROM drive? $10 after three years? It should be $10 *now.* Hell, you and me the consumer can buy these things for less than MS if this report is to be believed: DVD Drive

 

[mckmas8808]

But the overall point is that the Xbox 360 as designed will give MS a better cost flexibility. This is a strength of the system and a weakness for the PS3. Whether they are high by $75 is largely irrelevent, unless someone were trying to come up to some flawed calculation. But as an illustration, it shows a weakness on the PS3.

.Sis

Scale Sis it's about scale. How many Xbox 360s does MS look to sell over it's lifetime? How many do they look to sell over the next two years? Sony's model and scale seems to be a tad bit different. If Sony expects higher sells and has extra software to balance the system off of like BLU-RAY movies then I think Sony can adjust their price a little more. Sony also can afford to have weaker fabbed chip rating being one of the SPEs are disabled. Something that MS can not do. You have to add that into the equation too right?

 

[Sis]

Well what about Sony? Does this make ML 80%, 90%, 100% correct? Read what people like xbdestroya types. This guys understands the business.

Xb is a smart guy, just like the ML guys. But they are all guessing at figures in an attempt to make projections, and some guesses are better than others.

Take all the information, apply some common sense, do a little research, and then form your own opinion. What lessons can be learned from history? What's in the best interest of the manufacturers?

And most importantly, will Ratchet and Clank be a PS3 launch title?

.Sis

 

[dukmahsik]

point to take: anyone can be an analyst

 

[avaya]

Here's another PDF on that same server:

http://webpages.charter.net/spartan85/MSFT_UBS.pdf

This time it's from UBS Securities. It's titled "UBS Investment Research: Xbox 360 Update".

Somebody on that site has access to some nice reports.

Tommy McClain

Thanks for this,

UBS internal reports are hard to get hold of.

 

[Carl B]

point to take: anyone can be an analyst

Even better, everyone can be an analyst. Everyone *is* an analyst. Sis is right, I'm taking stabs, ML's taking stabs, the other analyst houses are taking stabs, engineering publications are taking stabs - everyone's taking stabs and if someone's right it's as much by chance as by genius.

Now, I think ML's numbers are whack - but that's neither here nor there. We get information every day, all of us, on these consoles and what's going on. No single report is the whole story, and we all just have to continually analyze what we see to keep an updated 'snapshot' of the scene and environment.

I personally think that interested fans of a subject matter can keep a closer finger on the pulse at times than disinterested professionals covering the same subject matter, but that's just my opinion.

In any event, at the very least, I can say that MS is going to be paying less than ML indicates for a DVD drive.

 

[blakjedi]

Thanks for this,

UBS internal reports are hard to get hold of.

Not if you know who to go to

Let me clarify. One of my best friends of 18 years is an analyst there (but in the hedge fund arena).

 

[mckmas8808]

But this is exactly what I'm saying: that according to the ML report, the CEO has indicated they won't take heavy losses going into 2007. Whether this is accurate or not, I don't know, but if it is, how can you suggest then that they go ahead and lose money for 18 months?

Instead of debating the merits of a loss leader approach--which I'm fairly certain all of us on this board understand--I would suggest instead you find a rebuttal to the Howard Stringer financial guidance.

.Sis

I did Sis. I said that the PS3 has more avenues to bring in money for software and other money savings than what the PS2 did. See Sony will have the benefit to use the sales of Blu-ray movies to help them set their price for the PS3. Include that with the fact that the number of Pro Duo sticks sales will rise. Remember memory cards for the PS2 were what $39.99 at the most?

A.) The Pro Duo sticks are priced starting from around $29.99 to $199. That's extra money that Sony can account for to offset the losses for the PS3.

B.) The Blu-ray movie sales is something else that Sony didn't have with the PS2. The PS2 obviously didn't have a Sony pushed and created physical media player. Sony makes more money from Blu-ray discs (games are included it's not just movies) than they do DVD discs.

C.) Sony is also looking to sell music and movies over the internet through Sony:Connect. Sony has already started to do this NOW in Japan. Their website has I think around 200 movies to download for the PSP. This again is something that the PS2 didn't have.

D.) Right before Sony release the PS2 I think they were on 180nm tech. Obviously as you know now the PS2 is using 90nm tech, yet they had to work hard to get there. You also should know that their 90nm tech is quite mature and the PS3 will be made using just that. Being that Sony will probably use 65nm quite soon after the PS3 is released this should save Sony money in relation to the PS2.


And those are what I learned from smart web posters. Imagine if I actually worked at ML with real insider information.