Blaming Faulty Part, Sony Scales Down World-Wide Launch of Playstation 3 09/08/2006 12:37 AM

WSJ.com - Blaming Faulty Part, Sony Scales Down World-Wide Launch of PlayStation 3 09/08/2006 12:37 AM

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Blaming Faulty Part, Sony Scales Down

World-Wide Launch of PlayStation 3 Start a FREE trial of the By YUKARI IWATANI KANE Online Journal September 7, 2006; Page B1 Subscribe to TOKYO -- Suffering from a huge, self-inflicted blow, a The Print Journal chagrined Sony Corp. yesterday said that a problem manufacturing a key part of its PlayStation 3 would delay the game console's European launch by four months and halve the Free US Quotes: number immediately available in the U.S. and Japan. Symbol Name The Japanese company is depending on the PlayStation 3 -- the most expensive and advanced console ever -- becoming a major Site Highlights source of revenue and a promoter of some of the company's key Get FREE E-Mail by topic Free Annual reports technology. Access free annual Check Out our Mobile & reports and other Wireless Services information on select GAME QUEST The trouble came from companies today! the very device Sony DIGEST OF EARNINGS The videogame battle will heat up Details of the latest corporate this holiday season when Sony hopes will help make earnings reported for FREE. and Nintendo launch new consoles to the console a success. challenge Microsoft's Xbox 360. See game Each PlayStation 3 will ALSO ON TECHNOLOGY screenshots and compare hardware be equipped with a specs. DUELING DISCS next-generation Blu-ray • H-P Scandal Puts Heat on DVD player, which will Chairman, Lawyer In a battle reminiscent of VHS vs. play high-definition Betamax, Blu-ray and HD DVD • Nervous Investors Await Lucent- are fighting for control of your movies in addition to Alcatel CEO living room. See how they games. Ken Kutaragi, MORE compare. the head of Sony's game division, told reporters FROM THE ARCHIVES

that the company was having trouble mass-producing a part for • Heard on the Street: Sony's the player and that this would delay production. Hopes for PlayStation 3 May Fall Short 07/19/06 "This became a typical result of not knowing what to expect with a brand-new component," Mr. Kutaragi told reporters. • Sony Unveils Web Strategy for "This was a completely unexpected problem. There's nothing I PS3 can say except, 'I'm sorry.' " 03/23/06

• Sony Delays PlayStation 3 It's the second time the PlayStation 3 has been delayed by a Release problem with the Blu-ray disc player. Sony originally planned 03/16/06 to release the PlayStation 3 in the spring but postponed its plans due to a delay in copyright-protection technology for Blu-ray. advertisement Wednesday's announcement also came after another embarrassing manufacturing glitch linked to Sony: Laptop- computer batteries it supplied to Dell Inc. and Apple Computer Inc. were last month found susceptible to overheating and http://online.wsj.com/article_email/SB115753007724954933-lMyQjAxMDE2NTA3NzUwMzcwWj.html Page 1 of 5 WSJ.com - Blaming Faulty Part, Sony Scales Down World-Wide Launch of PlayStation 3 09/08/2006 12:37 AM

Inc. were last month found susceptible to overheating and catching fire.

Success for the PlayStation 3 is vital for Sony to make a full turnaround after years of disappointing results as it lost market share in televisions and audio players. Though Sony's business has picked up because of improvements in the core electronics business, any loss of market share in game consoles -- the company's most consistent earner in recent years -- would threaten the company's long-term health. Dow Jones Sites The latest delay could hurt Sony in a number of ways. First, the • StartupJournal meager availability toward year's end will give rivals more time • OpinionJournal to establish their consoles in the market. Microsoft Corp. • CollegeJournal released its latest model, the Xbox 360, last year, while Nintendo Co. is planning a fall release for its radical new Wii • CareerJournal console, which comes with wireless controllers that look like • RealEstateJournal television remote controls and can be wielded like a tennis • MarketWatch racket or a sword.

• Barron's Online PlayStation 3 is still scheduled to be launched ahead of the Customer Service holiday season in the U.S. (Nov. 17) and Japan (Nov. 11). But • The Online Journal only a little more than two million units will be available by the end of December, divided almost equally between the two • The Print Edition countries -- about half the original plan. Just 400,000 consoles • Contact Us will be available on the first day of sale in the U.S. PlayStation • Site Map 3 won't be available in Europe until next March. • Help The PlayStation 3 delay was unwelcome news for a game • Subscribe industry that has shown signs of improved sales after a rough Advertiser Links holiday season last year. PlayStation 2 dominated the game market during the last generation of consoles, and publishers Featured Advertiser have been counting on its successor to provide the largest TODAY'S MOST POPULAR

audience of gamers on a single system. Intuitive. Decisive. 1. New Facebook Features Bother Smart. Members "People_Ready." Still, game executives and analysts have become accustomed to 2. Pearl BlackBerry Offers Email, Are you ready? production glitches during the rollout of new systems, Bells, Whistles Click Here ... particularly from Sony. "This was the piece of bad news we 3. Housing Slowdown Takes Its Toll were all waiting for," said Michael Pachter, an analyst at New HP Workstations 4. Paying Through the Nose to See for Financial Markets Wedbush Morgan Securities in Los Angeles. "This was the Notre Dame elephant hiding in the room." Boardroom 5. 'Drunkest' Rankings Need a Connection Sobriety Test At Sony, more than just the game division is at stake. The New HP Workstations for Financial Markets company hopes PlayStation 3 will boost Blu-ray over a rival COMPANIES advanced DVD technology called HD-DVD. Blu-ray's success Dow Jones, Reuters Order free annual reports on select would stimulate sales of Sony's electronics division and would Sony Corp. ADS (SNE) companies. provide a royalty stream from other electronics companies that PRICE 42.38 CHANGE -0.46 Fly award-winning adopt the technology. Singapore Airlines. 9/7 Sony Pictures could also benefit from Blu-ray as a source of Sustainable seaside homes in Baja. future sales growth, as conventional DVD sales slow. Further, Sony's semiconductor business is counting on sales of the Cell Dell Inc. (DELL) http://online.wsj.com/article_email/SB115753007724954933-lMyQjAxMDE2NTA3NzUwMzcwWj.html Page 2 of 5 WSJ.com - Blaming Faulty Part, Sony Scales Down World-Wide Launch of PlayStation 3 09/08/2006 12:37 AM homes in Baja. Sony's semiconductor business is counting on sales of the Cell Dell Inc. (DELL) microchip, a powerful new processor in the PlayStation 3 that it PRICE 21.73 developed with Toshiba Corp. and International Business CHANGE -0.37 Machines Corp. 9/7

At issue is a part in the Blu-ray player called the laser diode, Apple Computer Inc. (AAPL) which generates the laser light necessary to read Blu-ray discs. PRICE 72.80 This was manufactured without incident in small quantities CHANGE 2.77 during testing. But problems were encountered when trying to 9/7 mass-produce it. The delay pushed back production of the game console until late September, making it impossible for Sony to ship enough units to its three key markets in time for a global Microsoft Corp. (MSFT) launch planned for November. PRICE 25.43 CHANGE -0.18 Even with all the problems, Mr. Kutaragi said the company was 9/7 sticking to its global target of shipping six million PlayStation 3

units by the end of March 2007. It plans to launch the Toshiba Corp. (6502.TO) PlayStation 3 in Europe in the first half of March. Mr. Kutaragi PRICE 799.00 assured reporters that preparation of the other parts of the CHANGE -16.00 console were on track. 9/7

--Nick Wingfield contributed to this article. International Business Machines Write to Yukari Iwatani Kane at [email protected] Corp. (IBM) PRICE 79.40 BLOG WATCH CHANGE -0.88 Most Blogged About Wall Street Journal articles. 9/7 • New Facebook Features Bother Members • Lobbying Probe Looks at Payments to DeLay's Wife • Google to Let Users Search Archived News * At Market Close Full List of Articles Personalized Home Page Setup SEARCH THE BLOGOSPHERE Put headlines on your homepage Search for these words: about the companies, industries and topics that interest you most.