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Game woes seen as extra blow to Sony

Sony Computer Entertainment President Ken Kutaragi talks about PlayStation 3 at the Tokyo Game Show 2006 in Makuhari, Japan, on Sept. 22.

AP photo

TOKYO — It has been a horrible year for Sony.

The Japanese electronics company has been hit with a string of embarrassments that have dented its reputation for quality.

Already reeling from a string of laptop battery recalls, Sony Corp. saw its shares drop nearly 3 percent Tuesday amid fresh worries about the upcoming release of its much-anticipated PlayStation 3 video game console.

Sony has already twice delayed the product’s launch amid intensifying competition from rivals Microsoft and Nintendo.

The PlayStation 3 will hit stores in Japan on Nov. 11 and in the United States on Nov. 17. In Europe, they won’t go on sale until March, four months later than planned.

Investors worried about the product after Macquarie Equities analyst David Gibson wrote in a report that PlayStation 3 units on display at the Tokyo Game Show about 10 days ago operated erratically and had to be repeatedly reset.

“While the reason for this is unknown, we suspect it may be due to overheating as a result of enclosing the units and the high temperatures at the venue,” Gibson wrote in the report Monday. “We are concerned that such a problem has occurred so close to full production and is clearly negative news for the company.”

Earlier in the day, investment firm Goldman Sachs Group Inc. lowered Sony’s stock rating to “neutral” from “buy,” citing confusion over the release of PlayStation 3 and concerns that disappointing sales of PlayStation Portable may weigh on its earnings in electronics operations more heavily than expected.

Sony denied that there was any technical problem with the PlayStation 3.

The problems come in the midst of Sony’s widely publicized turnaround effort under its first foreign chief executive Howard Stringer.

It has been hit with mounting extra costs after about 7 million of its laptop batteries have been recalled on fears they could catch fire.

Desperately trying to catch up to Apple Computer Inc.’s iPod in portable music players, Sony said last month it was delaying the Japanese release of its new digital Walkman by a week until Sept. 23 because of a malfunction of an unspecified part.

It is also fighting to make a comeback in flat-panel TVs after falling badly behind Samsung Electronics Co. of South Korea and other rivals.

Sony shares have plunged over 20 percent since April, before the company’s battery recall woes.

Sony spokeswoman Nanako Kato said any problems at the Tokyo Game Show, where Sony, Microsoft and Nintendo showed off rival offerings under the same roof, were likely caused by one-of-a-kind temperature irregularities.

About 200 PlayStation 3 units were clustered together in close proximity and housed in kiosks that concentrated the heat generated by their processors and provided poor ventilation, Kato said. Overheating under such circumstances is a common affliction at trade shows, afflicting not just Sony products but those of its competitors, she said.

“While the reason for this is unknown, we suspect it may be due to overheating as a result of enclosing the units and the high temperatures at the venue.

David Gibson Analyst
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