Sony Shares Fall on Report of PlayStation 3 Delay (Update3)

Feb. 20 (Bloomberg) -- Shares of Sony Corp., the world's second-biggest consumer electronics maker, headed for their biggest two-day decline in 10 months after Merrill Lynch & Co. said the PlayStation 3 video game console may be delayed until early next year in the U.S.

Sony's shares fell 4 percent to 5,280 yen, following a 2.8 percent drop on Feb. 17, on the Tokyo Stock Exchange. Sony spokesman Kei Sakaguchi said ``there is no change in our original plan,'' and that the company intends to release the PS3 in ``spring'' this year.

Any delay would give rivals Microsoft Corp. and Nintendo Co. more time to win market share with their new consoles, especially if Sony's introduction is postponed after the Christmas shopping holidays. Microsoft's Xbox 360 went on sale in November last year and the successor to Nintendo's GameCube is due out this year. Sony may start selling the PlayStation 3 in Japan in autumn and by late 2006 or early 2007 in the U.S., Merrill Lynch's Joe Osha said in a report dated Feb. 17.

``Given the increasing competition from Microsoft and Nintendo, Sony can't afford any delays that may help its rivals get ahead,'' said Taiji Yoshida, who helps oversee $6.7 billion at Yasuda Asset Management Co. in Tokyo.

The PlayStation 3 may cost Sony $900 to build at the time of release and drop to $320 in three years, according to Osha's report. Microsoft loses about $153 on each Xbox 360, which retails for between $299 and $399, researcher iSuppli Corp. said.

Sony doesn't comment on the machine's price, Sakaguchi said.

Cell Chip

Nintendo's Revolution console may sell for less than $300 and will go on sale before Thanksgiving in November, Reggie Fils-Aime, executive vice president marketing for Nintendo America, told Cnet News.com last month.

The PlayStation 3 will be able to play Blu-ray high-definition DVDs and includes the ``Cell'' chip developed by Sony, International Business Machines Corp. and Toshiba Corp. The Cell allows more lifelike or intricate game graphics by using multiple central processors to speed operations.

Merrill Lynch's Tokyo-based analyst Hitoshi Kuriyama on Feb. 17 downgraded Sony's stock to ``sell'' from ``neutral.''

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

To contact the editor responsible for this story: Teo Chian Wei at cwteo@bloomberg.net.