MoneyWatch Tech

Sony Gaming Hurtin' for Certain

By Erik Sherman

Updated on: January 29, 2009 / 7:06 AM EST / MoneyWatch

Sony has just released its unaudited results for its third quarter ending December 31. While PS3 software unit sales was a slight bright spot, overall the news is pretty bad, due to worldwide PS3 sales trailing Nintendo's Wii and Microsoft's Xbox, decreasing sales of PS2 and PSP hardware and software, and the strengthening of the yen against the euro and U.S. dollar.

First, hardware unit sales:

Hardware	Unit Sales (millions)	% Change Over 2007
PS3	4.46	-9.0
PSP	5.08	-11.8
PS2	2.52	-53.3

Not only were unit hardware sales down, but the appreciation of the yen over the euro and dollar meant that Sony pulled in even less cash in its native currency. Next, software unit sales:

Software	Unit Sales (millions)	% Change Over 2007
PS3	40.8	+56.9
PSP	15.5	-15.3
PS2	29.7	-51.2

The one bright spot in unit movement has been in PS3 software. But royalties on titles isn't enough to pull the company's gaming division out of its hole. Divisional sales decreased by 32.2 percent year over year during the most critical seasonal sales period, and operating income dropped by a whopping 97 percent, to this year's thin $4 million. Plus, Sony is now carrying 8.5 percent more inventory on its books than last year, which means less profit and less cash potentially available.

The general picture is not good. The gaming division technically had a positive operating income for the quarter, but it was so slim as to seem like a rounding error. The cost of the PS3 improved, but that phrasing alone underscores a huge problem for Sony: it trails both Nintendo and Microsoft on getting profitable sales from its more current console, and that puts the entire division in danger, particularly as PS2 and PSP unit sales are ramping down. In fact, if the current trend continues, the PS2 could be dead in the water by this time next year.