Analyst: PS3 Delay Likely, Cost at $800
Microsoft may end up the only manufacturer with a next-generation game console on the market for at least another six months, says Merrill Lynch. A delay in Sony's PlayStation 3 could cause the electronics giant to miss the crucial holiday season in a majority of the major markets, according to analysts.
Merrill Lynch Japanese analyst Hitoshi Kuriyama told clients in a research note late last week that he was seeing evidence of a delay in the PS3 that could push the launch into autumn in Japan and late 2006 in the US. Any further delays would mean the console's debut into 2007, he warned.
Rumors of a delay in the console's development first began to circulate shortly after the launch of Microsoft's Xbox 360. However, Sony dismissed such talk, saying it was on track to release the PS3 in the spring of this year.
Behind the delays is Sony's choice to use the Cell processor and Blu-ray drive, Merrill Lynch said in a follow-up report. The initial bill of materials for the console could also reach $800, with that figure gradually falling to $320 within three years.
A delay in the PS3 could have effects on Sony's business elsewhere as well, analysts say. Supporters of Blu-ray, the Sony-backed high definition DVD format, are quick to point out a flood of the new PlayStation in consumers' hands would give the format an advantage over HD DVD.
Without the PS3, the only entry point into Blu-ray would be the prohibitively expensive units offered by Pioneer, which told BetaNews at CES 2006 that its units would retail for $1,800 USD.
However, analysts suggest a delay may be strategic, as Sony could wait until materials become less expensive before producing the systems in bulk. Sony currently faces potential hardware shortages that could limit the company to selling two to three million consoles this year.
"From a hardware standpoint, the largest exposure outside of Sony itself is Microsoft, which could benefit if the company is able to overcome supply problems with Xbox 360," Merrill Lynch wrote.
The firm estimates that Microsoft may sell as many as 10 million consoles by the end of the year. However, if the company ups its production to meet demand, some gamers may tire of waiting for the PS3 and opt for the Xbox 360.
It's an interesting problem for Sony, industry watchers say. "Sony, it seems, might have over shot in setting a technology bar, making the device quite expensive and difficult to make," wrote technology pundit Om Malik.
"The impact of this could be felt through the entire food chain - impacting graphics chip makers to software companies to even retail outlets. In other words, there should be a whole slew of fiscal resets coming."
Standing to lose the most, according to Merrill Lynch, is Nvidia, which supplies the graphics chipset for the PS3. While Nvidia says a delay in the launch of the PS3 console would not significantly affect its bottom line, Merrill Lynch disagrees.
"We think the absence of a significant PS3 ramp could hurt NVIDIA's progress towards the corporate gross margin target," the firm said. "We also think there may be a longer term impact if PS3 loses its competitiveness to Xbox360."
Nvidia rival ATI produces the graphics chipset for Microsoft's Xbox 360.