"PSX" market failure causes analysts to reconsider

[Deadmeat]

http://quote.bloomberg.com/apps/news?pid=10000101&sid=ae3RoEdbQC9Q&refer=japan

Sony PSX Console May Miss First-Year Sales Target, Analysts Say
April 20 (Bloomberg) -- Sony Corp.'s PSX console, the first product to marry the company's video-game and consumer-electronics technology, may miss its 1-million unit first-year shipment goal, analysts and investors said.

Sony, the world's second-biggest consumer-electronics maker, started selling the PSX for as low as $750 in Japan in December, aiming to win DVD recorder market share. PSX combines a DVD recorder with PlayStation 2, which dominates the video-game console market, outselling Microsoft Corp.'s Xbox and Nintendo Co.'s GameCube. That novelty isn't enough, said Nobuaki Murayama, of Cigna International Investment Advisors K.K. in Tokyo.

``It's nothing new as a game console, and it doesn't have all the functions of Sony's stand-alone DVD recorder,'' said Murayama, who helps manage about $560 million in Japanese equities, including shares of Tokyo-based Sony. That's why ``PSX sales aren't growing,'' he said.

Sony, which has said it will sell PSX in the U.S. and Europe this year, faces investor pressure to show it can repeat the success of products like PlayStation 2 and the Walkman portable cassette player. Chief Executive Nobuyuki Idei pointed to PSX as one of the innovations to revive profit after reporting a worse- than-expected fiscal fourth-quarter loss a year ago.

``PSX sales are below plan,'' Eiichi Katayama, a Nomura Research Institute analyst, said. ``Sony probably shipped about 150,000 units by March'' and may not meet the full-year target, he said.

Slowing Demand

Sony spokesman Hiroshi Okubo declined to comment on whether sales were on track. ``Demand generally slows after the year-end holiday shopping season, so things do not sell as much'' at the beginning of the year, he said.

The company's ability to produce successful new products has been implicit in the stock's valuation, said John Yang, a Tokyo- based analyst at Standard & Poor's.

``Sony's shipment target of 1 million units now seems like an ambitious plan,'' Yang said. ``A higher valuation of the stock has been justified because of Sony's brand premium.'' If the company doesn't produce more successful products, that premium may fade, he said.

``I may need to review my `Buy' rating on Sony,'' if Sony fails to convince him otherwise at its earnings announcement on April 27, he said.

Sony Premium

Sony's share price is 70 times its forecast earnings per share for the year to March 2005. Sony's bigger rival, Matsushita Electric Industrial Co., has a price-earnings ratio of about 62 times, according to Yang. Suwon, South Korea-based Samsung Electronics Co., Asia's most profitable electronics maker, trades at about 10 times estimated 2005 earnings, according to Thomson Financial.

Shares of Sony rose 16 percent in the past year, trailing the 47 percent rise in Topix Electric Appliances Index for the same period.

Japanese publications including the weekly Diamond magazine have reported that Sony has halted production of the machines. Spokesman Okubo declined to confirm the report, saying ``Sony generally makes production plans based on forecast demand.''

Sony executive Vice President Ken Kutaragi pitched PSX last May as a ``crossover'' device that ``challenges how far we can go to change consumer electronics.'' As well as games and movie features, the PSX allows photographs to be stored on its hard-disk drive for viewing on the television screen.

Missing Software

The machine was introduced in Japan with fewer functions than originally advertised to meet holiday demand. Users had to download missing software later on.

That inconvenience aside, for the average consumer ``PSX is somewhat confusing, because they're not sure if it's a game console or DVD recorder,'' analysts including Mizuho Securities Co.'s Koichi Hariya said.

``That an important product symbolic of Sony's potential to change didn't sell well gives a negative impression.'' Hariya said. He rates the stock ``underweight.''

Sony, which also makes Vaio personal computers, Clie handheld computers and Cyber-Shot digital cameras, has said it expects net income of 55 billion yen ($510 million) for the year ended March 31, less than half that of the previous year.

Restructuring fees totaling 175 billion yen, which include additional severance packages, will pressure profit. The group's global sales probably declined 1 percent to 7.4 trillion yen, because of a drop at its games division.

Holiday Sales

Holiday season sales for DVD recorders in Japan were led by Sony, albeit with the Sugoroku, a more conventional machine, beating out Matsushita Electric's Panasonic DIGA machines.

Sony said it had about 35 percent of the DVD recorder market during the year-end holiday shopping season in Japan. The Sugoroku accounted for 20 percent, and the PSX 15 percent.

Sony was later than many competitors in introducing its own DVD recorders, concentrating instead on next-generation optical disc recorders with more capacity to allow recording of high- definition broadcast programs.

``I think we've overcome that now with our high market share,'' Sony's Okubo said.

Domestic DVD recorder shipments are expected to grow 78 percent to 3.5 million units this year, according to the Japan Electronics & Information Technology Association. The industry group forecasts a 27 percent increase in 2005.

Global DVD recorder shipments are expected to increase to 9 million units this year, 2.5 times more than 2003 shipments. The association forecasts 76 percent growth in 2005.

Sony is preparing to start selling PSX in Europe, according to Nomura's analyst Katayama.

Stakes are a lot higher for both SCEI and Sony Corp. on PSX3. If things don't go as planned, the impact on Sony Corp would be beyond recoverable.... And with MS willing to lose $4 billion on Xbox Next.......

 

[Almasy]

Deadmeat, like I said, you need a shrink, that´s not good for your mental health.

 

[Deadmeat]

...

Deadmeat, like I said, you need a shrink, that´s not good for your mental health.

Why don't you say that to all the analysts who are downgrading Sony shares???

They are right to point out Sony Corp's inability to produce a hit product; Blu-Ray is going nowhere, Sony Corp is so much behind platpanel technology that it has no hope of catching up with its better funded rivals. The overhyped "PSX", with only 150K units shippped before the production stopped, proved to be a market failure.

Which makes Sony Group even more dependent on PSX3 and PSP, but SCEI will be losing, not gaining, market shares against MS in the 5th gen.

 

[Deadmeat]

...

Anyhow, "PSX"'s failure does raise doubts about wisdom of integrating CELL into other higher end Sony Electronics product for price premium and product differenciation, simply because market doesn't care about gaming.

 

[Psychogenics]

DM you so Xbox Bias its not even funny.....Sony will just discontinue making the PSX and won't release it here in the states.It's just a lesson just like MS learns that their not good at Hardware.

 

[Ty]

Sorry, I don't buy your excuse that the less-than-expected sales of PSX have anything to do with Consoles.

Are you harboring a grudge because you didn't get hired at Sony?

 

[Almasy]

Re: ...

Which makes Sony Group even more dependent on PSX3 and PSP, but SCEI will be losing, not gaining, market shares against MS in the 5th gen.

This is what I´m talking about. This alternate reality in your head isn´t right, and you should get some help before something happens. Get help, and you just might get a happier life. What good is it for you to keep doing this?

 

[chapvince]

PSX = prelude to the Sony's Home Server Dreams that CELL is designed to be. And their president had high hopes about PSX too. So it has links to the Console Forums.

PSX not doing well? I kinda call it, yay?

Playstation brand is strong, but strong in gaming that is. Unless Sony can get a Home Server at console prices, makes you wonder just how well such expensive "All-in-One"( are they really AiO? ) devices are going to do. Especially now that MS is refocused from bringing the Home Server back from set-top consoles(their initial plans for Xbox were to aped Sony but they realized it may not be the nicest way to go about) to the PC(MS holy grounds, with the market penatration and mulitmedia functionalities highly matured).

So in reality, it is PS3 vs Xbox2 and PSX2 vs PC, for the next gen living room entertainment. Sony better hope that Cell delivers and the Linux CE Group takes off, well and soon.

 

[Psychogenics]

Re: "PSX" market failure causes analysts to recons

http://quote.bloomberg.com/apps/news?pid=10000101&sid=ae3RoEdbQC9Q&refer=japan




Sony was later than many competitors in introducing its own DVD recorders, concentrating instead on next-generation optical disc recorders with more capacity to allow recording of high- definition broadcast programs.
``I think we've overcome that now with our high market share,'' Sony's Okubo said.

......

Late to the game and very early for the Next.....Blu-ray will own.you left that one out didn't you DM!!!!

 

[JasonLD]

And with MS willing to lose $4 billion on Xbox Next.......

Money alone doesn't win a marketshare...
It is just funny to see that guy nitpicking every Sony's move...

 

[kaching]

Anyhow, "PSX"'s failure does raise doubts

It's a little premature to declare failute - the race isn't over yet, Deadmeat. They have a year to meet their goal of 1 million PSX units sold, and they haven't even released into the European or American territories yet. They have definitely stumbled with their initial offering to the Japanese market which was unrefined and unfinished. But if they offer a revised model without most of the shortcomings of the initial Japanese offering, they will still have a shot.

integrating CELL into other higher end Sony Electronics product for price premium and product differenciation, simply because market doesn't care about gaming.

Cell is an architecture, Deadmeat, with several stated purposes besides gaming. To hope to defeat your enemy, you must truly know them, and oversights like this will not help your crusade

PSX = prelude to the Sony's Home Server Dreams that CELL is designed to be. And their president had high hopes about PSX too.

Key word: "prelude"

Playstation brand is strong, but strong in gaming that is. Unless Sony can get a Home Server at console prices, makes you wonder just how well such expensive "All-in-One"( are they really AiO? ) devices are going to do.

They have a pretty modest goal of selling 1 million PSXs worldwide within 1 year of launch. They're not making PS2-level sales predictions for this thing. They know the market is smaller. Doesn't mean it's not worth pursuing.

 

[Megadrive1988]

the PSX could very well be Sony's 'PocketStation' of home entertainment systems.

Sony has seemingly made a huge step forward for handhelds with PSP, compared to the PocketStation.

the PS3 could be to the PSX what the PSP is the to Pocketstation. a massive improvement.

although (and this is where you'll find the biggest hole in my analogy) there *is* a lot less time between PSX and PS3 compared to the time between PocketStation and PSP.

 

[Fafalada]

It's a little premature to declare failute - the race isn't over yet, Deadmeat. They have a year to meet their goal of 1 million PSX units sold, and they haven't even released into the European or American territories yet.

I thought they did sell like 100k units in Japan already, so they are 1/10th of the way there

 

[wco81]

Is the DVD recorder market overall that big?

Especially at those price points?

However, if they came out with a Blue Ray recorder, a big hard disk (at least 250 GB) and included PS3 functionality, I would easily pay $1000 for it, instead of $300 for the PS3 alone. The key is to intro. a product at the beginning of the PS3 cycle, not at the end.

Now sales of the home server version will be a fraction of the console-only configuration, of course, and the market for $1000 electronics products, even $750 electronic products, is a lot smaller than the mass-market price-point of $500 and less.

But it would be a terrific product in late 2005 or early 2006. If they tried to market it in 2009, then it won't be as popular.

 

[Deepak]

It is not as if SONY's existance depends on PSX!

 

[cybamerc]

Sony may have the rest of the year to meet its goal but with 150,000 shipped units in ~4 months and the production stopped to clear stock it doesn't seem that likely.

 

[Gubbi]

Is the DVD recorder market overall that big?

Dont know. But it will be.

Prices here in Denmark for stand alone DVD recorders are from $300 ( note: the dollar is low)and up. And we have 25% VAT here.

You could get a PS2, DVD recorder and have money to burn for the cost of the PSX.

Cheers
Gubbi

 

[cybamerc]

Gubbi:

> You could get a PS2, DVD recorder and have money to burn for the cost of the PSX.

The PSX has a HDD, records in stereo and looks awesome. Cheap dvd recorders are cheap because they suck.

 

[London Geezer]

Gubbi:

> You could get a PS2, DVD recorder and have money to burn for the cost of the PSX.

The PSX has a HDD, records in stereo and looks awesome. Cheap dvd recorders are cheap because they suck.

Thank you, was gonna post that myself.

 

[PC-Engine]

Gubbi:

> You could get a PS2, DVD recorder and have money to burn for the cost of the PSX.

The PSX has a HDD, records in stereo and looks awesome. Cheap dvd recorders are cheap because they suck.

Actually that's not true. PSX has a HDD but it lacks many features of even the *cheap* standalone DVD recorders. Not having a HDD while costing $350 and having many features over the PSX and works the way it's supposed to doesn't = sucks. Not only is the PSX expensive but it also doesn't do what it was initially advertised to do. Maybe you should check out that other PS3 server and PSX thread.

All in all, the execution is pretty bad, you can see the laundry list of problems (even after the latest 3/31 update).

It has indeed gone out of my expectation ) just a little bit over my expectations, bad execution on cheap gimmick products like I said before), and indeed I read about it on 3/27 on a Chinese forum about the news on "Nikkei Shimbun". I was just wondering when will people post this as I was too lazy to dig the old "PSX details" thread out.

From DCharlie at GA Forum

"Time for another PSX rant :

Well, the biggest issue (IMO) is the total lack of cable support coupled with the absolute shocking fact that you can only take line in from RCA.

EVEN THOUGH THERE IS AN SVIDEO INPUT(!!!!)

So if you have cable/non-bs satellite, then you are basically going to be HD-Recording a shitty signal and you can't use any sort of automated recording.

The DVD record speed was also a total distortion. I remember people going "HOLY SHIT!!! 24x DVD Recording!!!", but when it came out it only initially had "8x DVD recording" - but - the speed is IN COMPARISON TO CDR speeds. So - 8x DVD = 1x DVD.

Under the first drivers - it took an age to burn a DVD
Under the second drivers - it took 5 minutes less than an age to burn

When playing games and swapping out back to tv , the whole system has to reset itself. You can't play another game or move through the menus for around 1-2 minutes.

The Atrac burning speed is pretty slow.
MP3 playback is supposedly added, but that doesn't seem to be true either.

Switching channels sometimes means that sound is dropped altogether and the unit has to be reset. (This happens pretty often)

the location of the ports is a good idea (hide them away from the sleek from system) - but the ridge around them makes it a pain in the arse to plug/unplug stuff. Granted - you shouldn't really be doing this.

I thought the pad that came with the PSX is already busted. The left shoulder button is flakey, and the right analogue stick keeps playing up.
Plugged in a different pad and the same issues existed. Hmmm. Seems to be very tempremental.

Has a nasty habit of ignoring the fact that i chose the Foreign language track for certain broadcasts, meaning i have quite a few films recorded in Japanese. . The new drivers apparently support dual language recording.

Forget to set up your 40gig PS2 HDD part. and you have to delete your entire HDD contents.

About a minute wait before the unit actually starts to play a PS2 game.

etc etc etc...

It's a nice idea, it looks slick, it makes part of my life easier (recording late night anime and stuff) , but if i was to go back in time i would advise myself to put the extra cash to the cost of the PSX and get a proper HDD recorder."

Another from him.

"one thing i did read (don't have the source) was that they expected all the glitches and patches to be installable and the machine to be fully functional at the specs/abilities that were announced pre launch near the end of the year (!!!!!)"