Analyst: Lagging PS3 Sales 'Troubling'

The latest report from American Technology Research analyst PJ McNealy has said that discrepancies between Sony's claims of 1 mil PS3s shipped and yearly NPD expectations of 700-800k sold could be cause for 'investor confusion.' Based on assumptions of 500-600k PlayStation 3s sold in December, with full NPD results not expected until late in the day, McNealy says he believes "SNE's shipment number refers to a channel unit number, and our research indicates that a channel range of 20-30% for the PS3 is not unreasonable at this time." "This implies 200k to 300k units in the channel (in transit, in warehouses, and in retail shelves)," says McNealy, adding, "Please note: 200k units in the overall life cycle of the consoles is not material, but we believe there is headline risk here." He goes on to say, "It is our position that while the PS3 launch is seven+ weeks old, we find it a little troubling to find the console in stock," and adds, "There will likely be much time spent by investors and analysts trying to read the sales data from seven weeks and extrapolate for the rest of CY07." "Our current assumption has been that the PS3 cross-over point between supply and demand would happen in the June quarter, when the PS3 would be widely available everywhere. We are surprised to see the PS3 in stock in some stores at this point, and are reviewing why this could be the case and what factors could change this over the next 12 months," he concludes. In analyzing those factors for excessive stock in the retail channel, McNealy comes to a number of conclusions, including a continuing lack of new games, especially 'killer new titles,' some two months into the console's life. He also points to the $600 MSRP, but admits that price cuts are a "complex corporate decision" and concludes that the group would be "surprised if SNE cut the price of the PS3 in CY07." He also points to the console's Blu-ray capabilities, saying "the value proposition for the PS3 as a movie platform for the Blu-Ray camp--in addition to being a next-gen HD console--has not been fully marketed and pitched to consumers, and is a key driver, in our opinion, for helping aide hardware purchasing this year." And finally, that thus far few PS3 exclusives are on the horizon for 2007 seems troubling, with the prospect of a new Final Fantasy, Metal Gear Solid or Gran Turismo slipping into 2008 as potentially crimping hardware sales. Should the sales lag continue, McNealy points to major publishers Electronic Arts and Take-Two risking the greatest set backs, with THQ and Activision able to offset PS3 sales with strong Wii support and multi-platform movie license franchises.