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By Carl Howe

According to Forbes, Taiwan's Asustek Computer is delivering the first Sony Playstation 3 consoles to Sony (SNE) this month. Initial production goals are about 200,000 per month. The contract is for four million units, of which two million are expected by October. If you do the math, that is an extremely aggressive ramp-up. Hon Hai is also expected to begin production as well, and rumor has it Foxconn will be pulled in as well.

ps3

[Sony's Playstation 3 conceptual designs shown at the 2006 Consumer Electronics Show]

Readers will remember that last year at this time, developers were just getting their first beta units of Microsoft's XBox 360. If these units being delivered to Sony are in fact production units (something we don't actually know), Sony is far ahead of where Microsoft was last year in its production curve for Christmas 2006. If these units are simply production prototypes, Sony may be in about the same shape as Microsoft (MSFT).

All this said, Sony faces the same issue that Microsoft did last year: IBM's (IBM) production capacity and yields. However, IBM has been making the Cell chip far longer than it had Microsoft's chip last year. That should help with the yield problem.

Our prediction: Sony will enter the Christmas selling season with about two million Playstation 3 units to sell, and, just as with Microsoft, they will sell out even at its higher price of $599.

The open question is the quality of the Sony Playstation experience delivered, both by the platform and by the initial launch titles. Despite Microsoft's hopes for a flop, our bet is that Sony's marketing will be fairly conservative and polished, resulting in a good but not crazed launch. And the higher price will boost demand for both Sony's XBox 360 and Nintendo's (OTCPK:NTDOY) Wii platforms, both of which will be in the market as well. As we noted last year, first place will go to the company that markets and executes on its plan with the fewest errors.

Our money is on Sony to do exactly that.

SNE-MSFT-NTDOY 1-yr comparison chart:

SNE-MSFT-NTDOY 1-yr comparison chart

Full disclosure: I have no positions in any of the companies mentioned in this posting.

Source: The Gaming Wars: Sony's PlayStation 3 in Prime Position