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October 4, 2006

Bad gaming news for Sony, good for Nintendo

Posted by David Hunter at 9:31 AM ET.

Sony’s shares went in the tank yesterday after an analyst had a disconcerting report on the PS3:

Already reeling from a string of laptop battery recalls, Sony Corp. saw its shares drop nearly 3 percent Tuesday amid fresh worries about the upcoming release of its much-anticipated PlayStation 3 video game console.

Investors worried about the product after Macquarie Equities analyst David Gibson wrote in a report that PlayStation 3 units on display at the Tokyo Game Show about 10 days ago operated erratically and had to be repeatedly reset.

“While the reason for this is unknown, we suspect it may be due to overheating as a result of enclosing the units and the high temperatures at the venue,” Gibson wrote in the report Monday. “We are concerned that such a problem has occurred so close to full production and is clearly negative news for the company.”

It’s not exactly what you want to hear with the PS3 launch a little over a month away.  Meanwhile, Nintendo seems to be cruising to success with its brains vs. brawn market strategy:

It seems success in video game consoles isn’t just determined by the snazziness of your machine, but the snugness of your niche. Nintendo has shown that on the back of successfully marketing its DS hand-held game console to women and older people, it’s now raising its profit outlook for the fiscal year ending in March.

The Japanese company expects to see its net profit jump to $847 million from its previous outlook of $703 million, and sales are predicted to hit $6.27 billion instead of $5.42 billion.

It’s largely thanks to the success of its sleek, flip-top game console and accompanying games, which have been a hit with those outside the usual market of young males.

The alarming triumph of the DS Lite has now given Nintendo newfound confidence for its upcoming Wii games console, which it expects will drive earnings higher in the second half of the year — i.e., in the all-important Christmas period.

You may recall that while Sony and Microsoft are going to fight it out at the high end with expensive high tech machines that double as home entertainment centers, the Nintendo Wii is a comparatively inexpensive console with aspirations for gaming only. It also doesn’t hurt the bottom line that Nintendo is planning to sell its Wii gear for a profit, unlike Sony and Microsoft.

Filed under Coopetition, Microsoft, Nintendo, Sony, Xbox

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