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 Feb 09, 2005 - 01:00 PM - by Michael
* Sony's financial problems

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Bloomberg covers Sony's falling financial situation and the fact that they're banking on the PSP being a success:
The PlayStation Portable has to go right for Sony to stanch profit declines in its electronics, music and games divisions, which account for 80 percent of sales. Those three divisions are cooperating to produce the PSP, as the console is called. It will be introduced in the U.S. next month. ``They need the PSP to be a success,'' says Yuuki Sakurai, who helps manage $4.7 billion at Fukoku Mutual Life Insurance in Tokyo, including Sony shares. ``A hit would show that Sony is able to coordinate the different businesses to make a product the public can be excited about.'' Sony's group sales have grown just 2 percent on average in the past five years, while profit margins have averaged 2.4 percent, according to data compiled by Bloomberg.
They also catch Sony with their pants down admitting that they deliberately tried to create an artificial shortage: the last time they did this, it was to hype the PS2.
Limited production was a business decision, Kutaragi said at a New Year's reception in Tokyo. The company also wanted to avoid building up inventories. ``We needed to balance the investment with the risks,'' he said. Sony probably spent $100 million to $300 million to develop the PSP, says John Yang, an analyst at Standard & Poor's in Tokyo. ``Sony wasn't completely prepared for the PSP,'' says Kazuya Yamamoto, an analyst at UFJ Tsubasa Securities Co. in Tokyo. ``They are limited by the number of highly specialized chips they can make. It's not as if they can suddenly make it in large volumes.'' Shortages won't stymie demand, says Paul-Jon McNealy, an analyst at the American Technology Research Institute in San Francisco. ``If anything, it creates hype, and hype rarely hurts demand,'' he says.


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