TOKYO – Sony Corp. (SNE) took another blow with Nintendo Co.'s Wii game console outselling its PlayStation 3 by more than five to one in Japan last month, raising doubts over Sony's nascent earnings recovery.
Sony's game division posted an operating loss of 232 billion yen ($1.91 billion) in the year ended March 31 due to hefty start-up costs of the PS3, dragging down Sony's overall profitability.
There are investor concerns that a turnaround in its electronics division, led by robust sales of Bravia-brand flat-screen LCD TVs, could be offset by continued losses at the game unit.
In the latest step in its electronics operations, Sony said on Wednesday it would spend 60 billion yen over the next three years to boost its capacity to make image sensor chips, which are used in cellphones and digital cameras — Sony's cash cow.
Sony sold 45,321 units of the PS3 in May, compared with 251,794 units of the Wii.
In April, the ratio was four to one in favor of the Wii, according to Japanese game magazine publisher Enterbrain.
Nintendo, known for such game characters as Mario, Donkey Kong and Pokemon, launched the Wii in November. The device features a motion-sensitive controller that allows users to direct on-screen play by swinging it like a tennis racket or wielding it like a sword, opening a new avenue of game playing.
Rival Sony also started selling the PS3 late last year, but has seen slow demand so far due to its high price tag and limited availability of attractive software titles.
"If there were half a dozen good titles people wanted to play on the PS3, I'm sure it would actually be doing quite well," KBC Securities analyst Hiroshi Kamide said.
Sony ruled the $30 billion global game industry over the past decade with the original PlayStation and PlayStation 2.
"We are only less than a year into the new (console) cycle. It is wrong to say Nintendo has won and Sony has lost ... It's not game over, but it's not very encouraging."
Sony aims to ship 11 million units of the PS3 in the current business year to March 2008, up from 5.5 million a year earlier.
Hitting that target seems "rather difficult," Kamide said.
In the United States, the Wii was the top-selling new console for the fourth month in a row in April, with Nintendo selling 360,000 units, while Sony sold 82,000 units of the PS3 and Microsoft Corp. (MSFT) sold 174,000 Xbox 360 machines.
Analysts say Sony may also face an uphill battle in its planned expansion in its sensor chip operations.
With the planned 60 billion yen investment, Sony will boost its output capacity of CMOS censor chips, which are more power efficient than CCDs — the other type of major sensor chips.
Since Sony is relatively new to the CMOS market, it will likely need to offer its products at aggressive prices to compete with established makers such as Micron Technology Inc. (MU) and Toshiba Corp., hurting its profitability, said Yoshihisa Toyosaki, president of research firm j-STAR Global Inc.
Nintendo shares closed up 0.5 percent at 42,800 yen, while Sony was up 0.4 percent at 6,870 yen.
Nintendo's stock nearly quadrupled over the past two years, initially driven by strong demand for its DS handheld players and then by popularity of the Wii, far outperforming Sony shares, which gained 75 percent.