Sony Unveils 'Crossover' PlayStation 2

Thursday, May 29th 2003, 12:00 am

By: News On 6

TOKYO (AP) _ Sony Corp. unveiled a ``crossover'' PlayStation 2 video game console with a built-in DVD recorder and hard drive for storing data Wednesday, part of a strategy to combine technologies in hopes of boosting the company's brand and restoring its profitability.

The beefed-up PlayStation 2, called the PSX, will go on sale in Japan this year and is planned for the United States and Europe early next year, Sony executive deputy president Ken Kutaragi said. He refused to give a price.

``We want an extreme product to represent a new platform out of Sony,'' he told reporters at a Tokyo hotel where a prototype was shown.

The PSX was the highlight of a presentation by Sony executives outlining a new strategy to calm investors after the company last month reported a worse-than-expected loss of 111 billion yen ($945 million) for the January-March quarter.

That sent Sony's shares sharply lower in what the Japanese media dubbed ``the Sony shock.''

``The Sony shock was a shock for us, too,'' said chief executive Nobuyuki Idei. ``We want to change the shock into something positive.''

Sony has repeatedly promised to generate profits through futuristic gadgets that download entertainment for the network-linked home, allowing Sony to exploit both its electronics and entertainment divisions.

The video game console market is fiercely competitive, pitting the PlayStation 2 against the Xbox from Microsoft Corp. and the GameCube from Nintendo Co.

The PlayStation 2 is the No. 1 video game machine, with 52.5 million sold worldwide. Sony also plans to start selling a portable PlayStation 2 called PSP next year that is designed to rival Nintendo's popular Game Boy handheld device.

Richard Doherty, research director at Envisioneering Group, a technology research company, praised Sony's decision to add features to the PlayStation 2 because so many people already own the console and are used to handling its controller. In a demonstration Wednesday, a user with the game controller scrolled quickly through image icons to switch from TV to digital photo files to movies and music.

``It will not pay off immediately. But it's a very good direction,'' Doherty said. ``A lot of consumers in all geographies of the world are tired of having two or three things attached to their TV.''

Doherty said Sony's rivals would be hard-pressed to come up with versions of the PSX because neither Microsoft nor Nintendo possesses Sony's consumer electronics and game resources.

Some analysts were skeptical about PSX's prospects.

Jed Kolko of Forrester Research said the machine was trying to do too much. The overlap between game-players and people who want DVD recorders tends to be small, he said.

``The actual demand for the device is likely to fall short of expectations,'' he said.

Sony officials acknowledged the company overall is falling behind the competition. Even Sony's prized Vaio personal computers have lost their edge and domestic rival Matsushita Electric Industrial Co. outsells Sony in DVD recorders in Japan.

Like other Japanese electronics makers, Sony has taken a beating from emerging competition in Asia, especially China, that can produce gadgets at cheaper prices.

Sony plans to invest 500 billion yen ($4.3 billion) in computer chips through fiscal 2005 to maintain its competitive edge and will start producing next-generation liquid crystal displays for the lucrative flat-panel TV market. Sony now uses liquid crystal displays made by other companies.

The company has cut costs in the last three years, reducing plants to 52 from 70, and slashing 29,000 jobs, or 19 percent of its global work force. Through fiscal 2005, Sony will spend 280 billion yen ($2.4 billion) on cost-cutting measures aimed at saving 170 billion yen ($1.4 billion) a year.

Idei also said Sony is dropping talks to sell its life insurance unit. Sony had been in talks with Dutch insurance group Aegon NV.

The global electronics industry is changing so rapidly Sony must be extremely nimble to keep up, Idei said.

``It's not just a problem for Sony,'' he said. ``It's a problem for Japan as a whole.''

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