Sony takes big step into home entertainment - PSX Announced

[Perfect Stu]

TOKYO, May 28 (Reuters) - Sony Corp <6758.T>, under heavy pressure to cut costs and roll out hot new products after dismal earnings last quarter, unveiled plans on Wednesday for a new game machine for Japan and big savings.

The world's largest consumer electronics maker and creator of the hit PlayStation 2 home game console said it would launch the "PSX" in Japan this year with a TV tuner, hard disk drive and DVD recorder to create an integrated entertainment platform for games, music and motion pictures.

Earlier this month Sony unveiled the "PSP" hand-held game machine, to be launched by the end of 2004, which spurred a tumble in the shares of GameBoy maker Nintendo Co <7974.OS>.

The products are Sony's first offerings under a strategy to inject some of its hugely successful games technology into its languishing electronics division, which has recently been hit by sluggish sales of Vaio PCs and conventional home electronics.

Sony said on Wednesday it would focus on products that promise rapid growth, such as flat-panel TVs, DVD recorders, camcorders and digital still cameras.

It also plans a thorough shake-up of its manufacturing operations in high-cost Japan, which now accounts for 50 percent of its costs but only 30 percent of its revenue.

Sony shocked investors a month ago by posting its biggest quarterly net loss in more than eight years, far worse than the market's expectations, and warned that its operating profit in the year to next March would slip to its lowest in nine years.

At the same time it unveiled a 1.3 trillion yen restructuring and investment plan and vowed to achieve a 10 percent operating profit margin after three years -- better than both last year's 2.5 percent result and arch-rival Matsu****a Electric Co's <6752.T> five percent target.

But investors, upset that Sony had given no early warning of the dismal earnings and dismayed by the prospect of several lean years while it restructures, rushed to unload its shares.

Sony lost one-fourth of its market value in the two days after the announcement and its share price has since languished near seven-year lows.

Chief Executive Nobuyuki Idei has chided the market for what he sees as a fixation with the short term.

"We are always taking a longer-term approach than the market does," he told Reuters at an industry event on Tuesday.

Lingering market pessimism was evident on Wednesday when UBS Warburg cut its investment rating on Sony to "neutral" from "buy" and its target share price to 3,400 yen from 6,690 yen.

"We do not foresee a significant improvement in profitability from FY03 to FY05," UBSW analyst Kazushige Hata said in a note to clients.

Sony's shares ended flat at 3,000 yen while the Nikkei average rose 1.40 percent to a two-week high.

What do I see from this?

-Big price tag ($499?)
-Ability to play PS2 and PSone games
-Ability to play DVDs, DVD-Rs, CDs, CD-Rs
-Ability to record anything from your TV (shows, movies, etc.) onto either DVDs or the HDD
-USB 2.0 technology opens possibilities of connectivity with things like the upcoming PSP, Digital camcorders, digital cameras, Sony's EYE TOY technology, etc.
-a late 2006 PS3 launch

And I must say...that is one sexy piece of hardware. The blue LED light looks great, and it would fit right into my home entertainment center