Sony Takes BIG GAMBLE on next-gen

[Domination]

While sales of Sony's PlayStation 2 game console have
significantly outpaced rivals, experts believe Sony's business model may ultimately cripple profits.

According to a recent report by the Economist, Sony suffers from their dependence on a vertical business model. Thereby, Sony has a principal role in manufacturing and assembling key components for their game consoles and electronics products. By comparison, many of Sony's rivals both in the gaming industry and larger electronics market rely on a horizontal business model.

A horizontal business model relies on other companies to supply key components and assemble products to take advantage of lower costs.

To put things into perspective, Sony spent an estimated 46% of their total budget last year to fund semiconductor research and production. Over the next three years Sony is expected to spent 500 billion yen ($4.4 billion) on revitalizing their semiconductor business. The financial gamble will include the production of CELL processor technology which is expected to power Sony's next-generation game console and network computers.


According to Goldman Sachs analyst Shin Horie, "Firms outside Japan are increasingly focusing on specific areas of the production chain, from chips to sophisticated components, assembly to marketing. This allows, say, American, European and even Korean firms to marry their particular strengths with the advantages of cheap manufacturing in China and Taiwan. The Japanese are fighting this trend by upgrading their existing vertical (do everything in-house) model."

Likewise, the Economist suggests the long-term projections of Sony's gaming business are in jeopardy,

"The weakness in games, where operating profits fell by 40%, is especially worrying, as this division has lately generated most of Sony's profits. Sales of its PlayStation 2 are falling. To slow the decline in unit sales, on May 11th Sony announced that it would cut the price of its consoles in America. Moreover, the PSX which launched last year, which combines a game console and video recorder, has disappointed. Sony expects a fillip from the PSP, a portable game console that it will release in Japan later this year. But the successor to PlayStation 2, due in 2006, will have a far bigger effect on its fortunes—and will face stiff competition from Microsoft's Xbox."

Source (http://www.polygonmag.com/news/index.php?id=2202)


I knew Sony was investing money into next-gen but DAMN that's a lot of money.I read in a not so recent report at IGN that Sony was holding out before dropping the price on their PS2 console due to next-gen eating into their yearly profit and why Microsoft was able gain an advantage in sales over them.Therefore,bits and pieces had to be taken from PS2 sales.I had no idea,however,that it was $4.4 billion (US) that was invested,though.It is definitely a huge gamble,I admit,but,it looks like Sony is not planning on playing the game with kiddy-gloves this next round.

[The Outspoken]

It is definitely a huge gamble,I admit,but,it looks like Sony is not planning on playing the game with kiddy-gloves this next round.

It's not a terribly huge gamble. Sony broke even on the PS2 development costs, (about $2.5 billion), within six months of releasing the system. In addition, this technology they are developing, and patenting, will feed a whole lot more than just the PS3. They are going to use it some kickass workstations too, and it might even work its way over to desktops.

Sony has the chance to make billions on this.

That, and they have a ton of collateral to through around. I don't think they are too worried.

[KlawHammer]

So Sony spent more then NASA's entire budget (US$800 million)....whoa.Im sure Sony will pull through, they have quite a huge backing from consumer electronics.

[rev>thanu]

Like i said if sony's cell chip becomes the standard chip and dethrones Intel from it's place. well expect sony to make billions each year as microsoft does out of their software.

[RichardCypher101]

But they arent making CELL to be the standard chips in PC's.

-Rich

[rev>thanu]

yes the cell ships are intended to be inside about everything. from TVs, radios, computers, workstations and the ps3. so really the investment is not that huge considering in how many appliances sony will be using this chip to make profit out of it. yes if intel doesn't catch up and other major chip manufacturing companies, then yes the cell will be the standard chip of the future. To tell you the truth that is what i see sony accomplishing and really envisioning at the moment.

[Scott R. Mraz]

But they arent making CELL to be the standard chips in PC's.

-Rich

Actually yes they are. Sony's stratagy is to eventually (keyword) roll them out into every electronics device known to man (slight exaduration). This includes PDAs, PCs, Servers, consumer electonics, etc, etc.

[Makaveli_786]

But they arent making CELL to be the standard chips in PC's.

-Rich

Man I dont know which cell your talking about but they want cell to be synonymous with electricity.

[haggisns]

just to add:

Sony's latest price reduction was delayed because it did not fit well into their yearly financial reporting period. By keeping the pricing the same it allowed them to provide a better fiscal report.

[Marjoh]

You need to spend money to make money. And gumbling is part of the game. In this case, business. And as for the sale of PS2 dropping? My take is that it has something to do with both Nintendo and Microsoft dropping their price [of their consoles] by $50. And the fact that PS2 has already sold over 60 million units world wide, therefore the demand for it is not as high as in its early (or half way through) days.

Sony recently drop their price, as already mentioned, so I expect that they will lead once more through the remainder of the year. I also expect that PS2 will sold as much as the PSone (100 million. Which I'm pretty sure Sony did not expect) a few years from now when it's tag under $100.

[rev>thanu]

demand will mostlikely rise againg once the price goes down.

[Domination]

just to add:

Sony's latest price reduction was delayed because it did not fit well into their yearly financial reporting period. By keeping the pricing the same it allowed them to provide a better fiscal report.

hmm.... Must have lead to that then.I still think it's a huge gamble,but I trust that Sony will make good on it.

[Domination]

You need to spend money to make money. And gumbling is part of the game. In this case, business. And as for the sale of PS2 dropping? My take is that it has something to do with both Nintendo and Microsoft dropping their price [of their consoles] by $50. And the fact that PS2 has already sold over 60 million units world wide, therefore the demand for it is not as high as in its early (or half way through) days.

Sony recently drop their price, as already mentioned, so I expect that they will lead once more through the remainder of the year. I also expect that PS2 will sold as much as the PSone (100 million. Which I'm pretty sure Sony did not expect) a few years from now when it's tag under $100.

I'm most certain that it had a lot to do with the price tag on their console dispite it being dated.Cause the moment it happens,the more sales they were getting.

And I agree,spending money is the key to making money,but you gotta admit that that is one nasty number there.With that kind of money,I'm wondering if Sony has something else they're secretly working on that we haven't heard about yet.

[imported_The_One]

And I agree,spending money is the key to making money,but you gotta admit that that is one nasty number there.With that kind of money,I'm wondering if Sony has something else they're secretly working on that we haven't heard about yet. That is VERY likely. Big corporations like Sony doesn't just tell it's consumer every single product their researching nor every move their making. So they may be doing some "secret" (take "secret" lightly) research while covering it up as part of the Cell budget :roll:. It IS a possibility you know?

[KlawHammer]

But they arent making CELL to be the standard chips in PC's.

-Rich

True, Intel and AMD own that arena by the way as well.

[RichardCypher101]

Ive read about them wanting to integrate CELL into many home appliances and such, but I do not remember them wanting to be THE compeditor with AMD and Intel.

-Rich

[KlawHammer]

I doubt they'll risk PC chipmaking really.

[The Outspoken]

I doubt they'll risk PC chipmaking really.

I don't think it will be a risk if they see the competition faultering. It all depends on the kind of facilities they have going and such. It's not that big of a jump.

And from a computer technicians point of view, the Cell technology is just amazing. I mean, with it patented and all, it would take a very small extra amount, and very little negotiating with computer companies to carry Sony PC chips.

[Ress Cor]

Yes but then we'll have Cell running Windows PC's? WTF, not gonna happen, Sony will put the chip into everything they can, but unless they start makin OS software, seeing these chips in computers is a far cry, HOWEVER, if Toshiba, IBM, and Sony get together to make an OS.....

[The Outspoken]

but unless they start makin OS software, seeing these chips in computers is a far cry

it seems very likely that Sony will start encroaching on the OS buisness...

[Marjoh]

I do not see Sony in the PC chip-making business. Well not this coming gen anyway. Sony would likely wait and see feedback regarding CELL once it is out. Then they'll decide on a plan for the next-gen (next-gen after next-gen).

So Sony in the PC chip-making and even OS business is not out of the question. Just not today. Although I don't expect them to lead Microsoft in their first run (OS).

[Makaveli_786]

Sony make OS's for CNC machines, DJ boards and many many other things.

Its not really a big gamble because every CNC industry in the world will want a cell chip on board and that right there will raise an absolute fortune for Sony.

[KlawHammer]

Yes but then we'll have Cell running Windows PC's? WTF, not gonna happen, Sony will put the chip into everything they can, but unless they start makin OS software, seeing these chips in computers is a far cry, HOWEVER, if Toshiba, IBM, and Sony get together to make an OS.....

Lets just say M$ is screwed...

[Ress Cor]

While the Russians used pencils.

[KlawHammer]

Sometimes you just need to do things the simple way...

[Makaveli_786]

You can get zero gravity pens for like 100 pound, lol they stop writing after a week too.

[Fats]

Link (http://urbanlegends.about.com/gi/dynamic/offsite.htm?site=http://www.spacepen.com/usa/catalog/1001/cat%5F1001.htm)

:lol:

[KlawHammer]

Us Russians dont need fancy-schmancy American junk - we do things the simple and logical way. Look at the M16 made by the Americans during the Vietnam war...our hero Mikhail Kalashnikov made the AK-47 to counter and it turned out to be a simple but effective weapon having more "grunt" then the carbon fiber plastic piece of crap the Americans made...

[Maya 5.0]

Us Russians dont need fancy-schmancy American junk - we do things the simple and logical way. Look at the M16 made by the Americans during the Vietnam war...our hero Mikhail Kalashnikov made the AK-47 to counter and it turned out to be a simple but effective weapon having more "grunt" then the carbon fiber plastic piece of crap the Americans made...

I would pick a M16 over an Ak anytime over long distances.The kickback of that big AK round would equal probably to poor acuracy.

[axia777]

sony is still gonna whup them. nuff said....

[Ress Cor]

I would pick a M16 over an Ak anytime over long distances.The kickback of that big AK round would equal probably to poor acuracy.

You don't know much about guns do you? The AK is designed in such a way that if the enemy picks it up and tries to use NATO issued ammo it won't work in the AK, but AK ammo will work in NATO guns! Also the AK is accurate if you know how to use it properly. The first bullet in the AK will go exactly where its pointing, after that the feedback is quite large, so a smart soldier would only fire that gun in very short bursts.

The M16 has an advantage of being a more accurate when spraying gunfire.

[ibrooklyn]

I would pick a M16 over an Ak anytime over long distances.The kickback of that big AK round would equal probably to poor acuracy.

You don't know much about guns do you? The AK is designed in such a way that if the enemy picks it up and tries to use NATO issued ammo it won't work in the AK, but AK ammo will work in NATO guns! Also the AK is accurate if you know how to use it properly. The first bullet in the AK will go exactly where its pointing, after that the feedback is quite large, so a smart soldier would only fire that gun in very short bursts.

The M16 has an advantage of being a more accurate when spraying gunfire.

lmao who uses the M16s??? That gun was used back in NAM, the gun was very bitchy but acurate and VERY deadly. Back in nam american soldiers had to use 20 round magazines to prevent or lessen the JAMS, and then Americans made a new version of the M16 which is the M16A2....and with M16A2 you cant really spray gunfire since it shoots in Single or Burst Mode only.

BTW why use the M16A2 when an M4A1 is a much lighter weapon, comes with a whole bunch of mods, almost as acurate as the M16A2 and owns the AKs....and looks nice better than the AKs =D

[KlawHammer]

Better for you, to use the M16 you dont need to be very skilled as the gun has less recoil and pretty impressive accuracy when compared to the AK, the Kalashnikov on the other hand has lots of recoil but is more deadly at short distances. And as Ress Cor said, you need to overcome the recoil aspect of the gun, a smart soldier whould fire in short bursts.

[Domination]

Wow.You guys move on quick.Tell,though,how did we get on this subject? :lol:

[Makaveli_786]

You ever fired an M16?

They used to be standard issue a while back, I fired a few types during our training course, they were shit, I much prefer an AK-47, the M16A2 was improved but wasnt good enough and it went all the way to the M16A4 which was crap too.

The AK-47 is better point blank, by the time the M16 has stopped jamming youve already got two bullets in your ass so whats the use.

[KlawHammer]

This justs puts further fuel in the fire of fact that AK-47s are for everyone!

[Maya 5.0]

I would pick a M16 over an Ak anytime over long distances.The kickback of that big AK round would equal probably to poor acuracy.

You don't know much about guns do you? The AK is designed in such a way that if the enemy picks it up and tries to use NATO issued ammo it won't work in the AK, but AK ammo will work in NATO guns! Also the AK is accurate if you know how to use it properly. The first bullet in the AK will go exactly where its pointing, after that the feedback is quite large, so a smart soldier would only fire that gun in very short bursts.

The M16 has an advantage of being a more accurate when spraying gunfire.

Only from others that have compared the two.But sorry if i offended your gun skills rambo.

[KlawHammer]

Lol. What was the previous topic b4 we veered off-topic?

[imported_The_One]

Lol. What was the previous topic b4 we veered off-topic?

Yes but then we'll have Cell running Windows PC's? WTF, not gonna happen, Sony will put the chip into everything they can, but unless they start makin OS software, seeing these chips in computers is a far cry, HOWEVER, if Toshiba, IBM, and Sony get together to make an OS.....

Lets just say M$ is screwed... There, that was the last post that was ON topic :D.

The AK-47 is better point blank, by the time the M16 has stopped jamming youve already got two bullets in your ass so whats the use. Hahaha, yeah, no kiddin'.

This justs puts further fuel in the fire of fact that AK-47s are for everyone! Everyone BUT little kids :lol:.

[Makaveli_786]

LOL, considering its the most produced gun, the most famous gun and the most in demand gun on the ENTIRE planet isnt it a little, should we say OBVIOUS which is the better gun???

[Ress Cor]

Don't forget, a gun may be good, but its the skill of the soldier that matters most, so let's leave this gun thing alone now.

[KlawHammer]

FINALLY!