Sony announced plans for a powerful do-it-all game machine yesterday, as the world's largest consumer electronics company tried to reassure worried investors that it had not lost its creative touch in the home entertainment market.
The new device was trumpeted , along with a swathe of cost cutting measures, at the firm's annual executive strategy meeting, which falls this year against a backdrop of dismal results and a share price that has fallen to its lowest level in seven years.
PSX, as the machine will be called, will be an all-singing, all-dancing home entertainment system combining elements of the PlayStation 2 game console with a TV tuner, hard-disk recorder, memory stick slot and broadband connectivity. Executives said they hoped the device would create a new market - a key aim of Sony chief executive Nobuyuki Idei who vowed earlier this month that his team would come up with a revamped profit model within three years.
After not putting a foot wrong for 10 years, Sony has hit a wall this year as fierce competition from Chinese and South Korean firms has pushed down prices of Vaio computers, videos, televisions and cameras. In April, the firm posted its worst quarterly earnings in eight years and after a warning that its profits would slump to a similar low in the year ahead, Sony's share price lost a quarter of its value.
The worst performer has been the company's electronics division, which accounted for two-thirds of sales last year but only a fifth of profits.
The new machine is part of a plan to inject new life into the electronics arm of the business by introducing more of the technology used so successfully in games, the company's most-profitable arm.
Although the PSX will not replace the PlayStation 2 - the next generation of the world's most popular game console is still in development - it aims to realise Sony's goal of convergence in gaming, film, audio software and technology.
The company hopes this will set the new product apart in the fiercely-competitive con sole business. Despite the pre-eminince of PlayStation 2, its profitability has been hurt by cost-cutting by rivals such as Microsoft's X-Box and Nintendo's GameCube.
To settle market jitters, Sony has promised to achieve a 10% operating profit margin in three years, a fourfold improvement on last year and double that of its main domestic electronics rival, Matsushita Electric.
The ¥1.3 trillion restructuring plan would see the company moving away from lower-end products - that can now be made more cheaply in China - and concentrating on high-price items such as flat-panel televisions, camcorders and DVD recorders. It remains to be seen whether this will be enough to halt the slide in the company's share price and allay threats of a credit rating downgrade.
