Sunday, January 25, 2009

Will Sony Have What It Takes to Produce a Successful Playstation 4?

This is massive news. As recently as October Sony (SNE) were predicting a profit, now they have made their first loss in 14 years. Already they have an austerity programme in place with company wide redundancies. And their cash shortage has forced them to raise new capital in the middle east and to sell off parts of the company.

Two bits of Sony are in especial trouble, their mobile phone joint venture with Ericsson (ERIC), which has seen a 23% sales slump, and their Playstation division. From being runaway leader in the last console generation Sony are now running third and last in this generation with nothing in sight that could improve matters. Some analysts have said that the Playstation PS3 losses are so great that they have more than canceled out the previous profits made by earlier Playstation models.

Sony are in trouble because they have no big, successful product differentiators. In fact, for much of what they make you can buy a better equivalent for less money. The Xbox 360 is a prime example and many consumer electronic items from Samsung and LG are further examples. The high value of the Japanese yen is making this even worse.

There will now be a massive restructuring at Sony. It is a matter of survival. They need to find a way back to giving customers what they want, to innovating and to running the business more commercially. Things are so bad that you must wonder whether they have the will and resources necessary to produce the Playstation 4.


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