Sony is looking to reduce its initial outlay on the NGP next-gen portable games console, with CFO Masaru Kato telling the WSJ that the new handheld will not be as “investment heavy” as previous hardware as the development budget is pared away. Reports claimed last week that Sony had decided to halve the NGP’s expected memory as well as rely solely on removable storage, in an attempt to bring down the sticker price.
TOKYO—Sony Corp.'s chief financial officer said the company doesn't expect the large losses usually associated with the launch of a new videogame device when its hand-held system makes its debut later this year, because the it intends to forgo expensive development of components.
Historically, PlayStation systems have required big investments to develop and make new semiconductors for the device. But finance chief Masaru Kato said in an interview that Sony has a strategy to ease capital expenditures for its new hand-held console, the PlayStation Portable—tentatively called the Next Generation Portable, or NGP.
For example, Sony could use chip foundries—chip-making outsourcing companies—and eliminate the cost of building the company's own semiconductor factory. It could also buy readily available parts, or turn to contract manufacturers to reduce the upfront investment needed for the product.
Since showcasing the NGP at a media event this year, Sony has remained mum on the device. It has yet to disclose its price or exact launch date. The size of the investment in the product will be a major factor in determining its price.
The NGP won't be as "investment heavy" as past platforms, Mr. Kato said, without detailing specific measures Sony might take.
The hefty costs of developing the PlayStation 3 contributed to four straight years of losses at Sony's game business—until the division finally turned a profit in the fiscal year ended March 31. After launching its Xbox 360 game console in Nov. 2005, Microsoft Corp.'s home entertainment division lost money for two straight years, including the year it was released, before turning a profit in the third year.
Last week, Sony said it expects profit to shrink at its Network Products and Services group, which includes the PlayStation business, despite a sales increase.
The company cited several factors for the expected profit decline, including the impact of recent hacker attacks on the PlayStation Network, and the debut of a new game machine.
Sony forecasts a return to a net profit of ¥80 billion ($989.5 million) this fiscal year following three straight years of losses. Sony overall would have returned to a net profit in the just-ended fiscal year had it not been for the March 11 earthquake and tsunami. The disaster made it necessary to write off certain deferred-tax assets, resulting in a hefty ¥259.59 billion net loss for the year.
Like other major Japanese exporters, Sony continues to face challenges from the stubbornly strong yen, which diminishes overseas earnings when converted into yen.
But Mr. Kato said Sony is now "much leaner" than in the past in coping with the strong yen.
In the last fiscal year, each one-yen fall in the U.S. dollar's average exchange rate shaved ¥2 billion off Sony's operating profit. Each one-yen fall in the euro cut operating profit by ¥7 billion. But Mr. Kato said dollar movements this fiscal year will be almost neutral for operating profit, "because a lot of manufacturing has moved offshore."
Changes in the euro's exchange rate should have less of an impact than in the last fiscal year, but any improvement would be modest, he said. Each one-yen fall in the euro will still translate into a ¥6 billion operating profit decline this year, he said.
"At this level of exchange rates, on a consolidated basis we are still able to make money. We are not in a loss situation," he said. "If the currency shifts toward a weaker yen, I think we can benefit from that."
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