Sony Video Game Losses Continue with Playstation 3

Sony will lose about 50 billion yen ($413 million) in its video games business this fiscal year, and recovery won't come until the arrival of more games to play on the PlayStation 3 machine, a company executive said Thursday.

The main point is that the PS3 will still be producing operating losses," Senior Vice President Takao Yuhara told a small group of reporters at Sony Corp (NYSE:SNE - news).'s Tokyo headquarters.

According to an article in the Associated Press (AP), on Wednesday, Sony reported that losses for the January-March quarter widened from the same period a year ago to 67.6 billion yen (563 million) in red ink, largely on launch costs for the PS3, or PlayStation 3, which went on sale in November in Japan and the U.S., and in March in Europe.

But Sony, which makes Vaio personal computers and Walkman portable music players, forecast a record profit for the fiscal year through March 2008 at 320 billion yen ($2.7 billion).

Booming sales of flat-panel TVs and digital cameras that have been lifting sales are expected to continue and boost Sony's earnings in coming months, Yuhara said.

Although PS3 losses are expected to shrink with cost cuts this fiscal year, the key lies in having Sony and outside game-makers produce attractive games to play, which fully exploit the machine's expensive technology, he said.

"What's most important is software," Yuhara said. "In every region, our software lineup will be strengthened." Lack of software was an obvious major criticism last year when the PS3 was released. I recall a friend of my ecstatic that he beat the crowds in securing his own PS3 with the 60G HD before Christmas. He was thrilled to be playing 2 of the 4 games released at the time while I enjoyed my stack of XBOX 360 games. Well here is hoping their ante up on their promise to deliver more software.

According to the AP, Sony's revival efforts, led by Welsh-born American Howard Stringer, Sony's first foreign CEO, may finally be starting to pay off. After taking the helm in 2005, Stringer got Sony to drop unprofitable businesses, sell off assets, reduce jobs and shutter plants. But losses from PS3 remain Sony's biggest headache.

Intense competition with Nintendo Co.'s hit Wii, with its unique wand controller, also has hurt PS3. lets not also forget the Wii is in a more affordable price range of consumers and its interactive joystick system is just plain cool, taking sporting games to the next level.

Sony shipped 5.5 million PS3 machines in the fiscal year through March 31, fewer than the 6 million the company had targeted. Nintendo shipped 5.84 million Wii machines worldwide during the same period.

Earlier this year, Yuhara had said Sony plans to break even in fiscal 2007 in the gaming business. On Thursday, he said he hoped Sony's game operations will turn a profit by fiscal 2008.

Sony shares, which have gained about a third over the past year, rose 2.6 percent to 6,630 yen ($55).