Sony to Buy Cloud Gaming Company Gaikai for $380 Million

Sony Corp. (6758) agreed to acquire U.S. gaming platform company Gaikai Inc. for about $380 million, as the maker of PlayStation game consoles prepares to expand cloud- based entertainment services.

The transaction is scheduled to be completed by the end of August and the effect on earnings is expected to be small, the Tokyo-based electronics maker said in a statement. Closely held Gaikai, based in Aliso Viejo, California, has expertise in transmitting data between cloud servers and users without delay, said Satoshi Nakajima, a spokesman for Sony’s game unit.

Chief Executive Officer Kazuo Hirai pledged in April to revive earnings at Sony by focusing on game players, digital imaging products such as cameras, and mobile devices including smartphones. The proposed acquisition shows that the company seeks to boost sales from going online, said Takashi Oka, a Tokyo-based analyst at TIW Inc.

“It’s a positive move that shows Sony is focusing on online gaming services,” said Oka. “Online services have the potential to grow into a stable source of revenue within two to three years, if Sony can line up good titles.”

Sony aims to revive earnings by boosting sales at its game unit after introducing PlayStation Vita handheld machines last year. The maker of Cyber-shot cameras and Bravia televisions posted a 457 billion yen ($5.7 billion) loss for the year ended March 31, as its TV unit continued losing money amid the strong yen, falling prices and competition from South Korea’s Samsung Electronics Co.

Turnaround

Hirai, who made Sony’s game business profitable as head of the unit, is cutting 10,000 jobs as part of a turnaround plan.

Sony forecasts revenue will rise 14 percent to 7.4 trillion yen this fiscal year, helped by smartphones and portable game players. Smartphone sales may rise to 33.3 million units from 22.5 million and handheld game players including PlayStation Vita may more than double to 16 million units from 6.8 million, the company said May 10.

Sony “will deliver a world-class cloud-streaming service that allows users to instantly enjoy a broad array of content ranging from immersive core games with rich graphics to casual content anytime, anywhere on a variety of internet-connected devices,” Andrew House, who heads Sony’s game unit, said in the statement.

The timing for Sony to start the cloud-streaming service of games hasn’t been determined, Nakajima said.

Samsung Tie-up

Samusung will offer cloud-based gaming services that were developed jointly with Gaikai to users of some of its TV models in the U.S., the world’s biggest TV maker said last month.

Sony’s Nakajima declined to comment whether Gaikai will continue offering services to its existing clients.

Sony has been increasing online services including PlayStation Suite, which allows users to download games on devices that run on Google Inc.’s Android, reaching out beyond its PlayStation machines to challenge competitors such as Nintendo Co. (7974)

Japan’s biggest exporter of consumer electronics sold 196.7 million game titles in the year ended March 31, down from 210.9 million sold in the previous year, Sony said in May. The company projected game software sales to remain little changed for this fiscal year.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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