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Sony Shows Revamped PlayStation 2 Machine

Posted on: Wednesday, 28 May 2003, 06:00 CDT

By YURI KAGEYAMA

TOKYO (AP) -- Sony Corp. (SNE) on Wednesday showed a revamped PlayStation 2 video game machine with a built-in DVD recorder and TV tuner, which can download movies and music and is a key part of the company's new business strategy.

The Japanese electronics and entertainment giant said the PSX is a "crossover" between game machines and consumer electronics devices. Its game controller can be used to quickly search and select functions.

The PSX, which has a hard drive that can store data, goes on sale in Japan this year and is planned for introduction in 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.

The PSX enters a fiercely competitive video game console market, which includes the Xbox from Microsoft Corp. (MSFT) and the GameCube from Nintendo Co.

The unveiling of the PSX was the highlight of a presentation by Sony executives outlining a new strategy to calm investor jitters 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. It said the PSX was part of that vision.

Sony has music and movie units, as well as a video-game business. The PlayStation 2 is the No. 1 video-game machine, with 52.5 million sold worldwide. Sony has recently announced it will start selling a portable PlayStation 2 called PSP next year. The PSP is designed to rival Nintendo's popular Game Boy handheld device.

Idei said Sony needs to achieve profits not only through cost cuts but also through growth. Sony will invest 500 billion yen ($4.3 billion) in computer chips through fiscal 2005 to maintain its competitive edge, it said.

Hitoshi Kuriyama, analyst at Merrill Lynch in Tokyo, said Sony's problems underline the tough times for all Japanese electronics makers in the face of competition from China, where labor is cheaper.

"Sony needs a hit product, but one hit product isn't going to be enough given its size," he said.

Sony has cut costs in the last three years, reducing plants to 52 from 70, and cutting 29,000 jobs, or 19 percent of its global work force. Sony said more cost cuts may be in the works.

Through fiscal 2005, Sony will spend 280 billion yen ($2.4 billion) on cost-cutting measures that will save the company 170 billion yen ($1.4 billion) a year, Sony said.

Sony will also start producing next-generation liquid crystal displays for the lucrative flat-panel TV market. Sony now uses liquid crystal displays made by other companies.

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

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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