I've often scratched my head over Sony's (SNE) Playstation 3 business strategy -- the expectation that it could wait an extended period of time while selling the system at a loss. Some information from December that had missed my attention until now suggests that even after nearly five years, the company is still losing money on every unit out the door. Given the fiscal realities of the division and the company, I wonder if it could -- and should -- be put on the chopping block.
The research firm iSuppli did a teardown of the 120GB hard drive PS3 last month and calculated a materials and manufacturing/test cost of $336.27. Mind you, this is the unit that the company has been selling for $299. That apparently, though, is an improvement because the previous version sold for almost $50 less than the cost.
According to iSuppli, things should get better for Sony, because materials costs should drop significantly this year.
The latest generation PS3 is significantly revised from previous versions, according to iSuppli. The major changes involve the use of less expensive semiconductors, a general redesign of the product and a reduction in the number of components in the console, the firm said.The new version employs chips manufactured at the 65- and 45-nm technology nodes, iSuppli said. It features approximately 2,568 components, down from 4,048 in the original version, iSuppli said.Granted that Sony is getting royalties from games sales, but, jeez Louise, it's been playing the "sell at a loss" game for a ridiculous amount of time, and Sony's financial standing has taken a beating, including the games-selling division, which hasn't seen a profit since this side of the PS2 era. If the games were enough to make the financial argument for continuing the practice, you'd think that the division might have -- oh, I don't know ... shown a profit?
How long can it go on? How can the company continue to subsidize an entire division that seems incapable of buying black ink instead of red? If the company doesn't pull out of its nose dive soon, it's hard to see how it could justify continuing to produce the PS Anything. Maybe that's just the thing that Microsoft (MSFT) and Nintendo have been waiting for, as they both seem to be able to make money at least some of the time.
[UPDATE: I originally had 5 years, but it came out in 2006, so that's about 4. Still a honkin' long time.]