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Sony (SNE) announced earlier today in Japan that it will cut the cost of its forthcoming (Nov. 11th) 20GB HDD equipped PlayStation 3 game console in Japan by 20% and also include HDMI connectivity with all models. HDMI was previously only available with the most expensive 60GB HDD version.

The 20GB hard-disk-drive model with HDMI will cost 49,980 yen ($426) versus its prior price tag of 62,790 yen ($535). In a press release, Sony explains:

"Given the sharp increase in availability of flat displays supporting HDMI in the market, SCEI has decided to equip HDMI as standard on all PS3 systems." (Sony press release)

Microsoft's Xbox360 sells for 39,795 yen ($339) and a Core System version that comes without a hard drive will go on sale Nov. 2nd for 29,800 yen ($254). Nintendo's (OTCPK:NTDOY) Wii console is set to launch in Japan on Dec. 2nd for 25,000 yen ($213).

Reuters.com quotes Hirokazu Hamamura, president of Enterbrain, a Japanese game magazine:

"This will drive PS3's unit sales. It is still more expensive than its rivals, but the revision has put the machine within the allowable range of game machine prices."

Masaki Iso, chief investment officer at Yasuda Asset Management argues:

"Sentiment might change if the product sold well as a result of this. But it is still received negatively because the company changed its mind after comparing its price with others."

Ken Kutaragi, president of Sony Computer Entertainment commented as follows from the Tokyo Game Show:

"What is important is that we get more consoles sold to make up for the price cut and get more game makers and chip makers in our camp."

Hiroshi Kamide, an analyst at KBC Securities warns 'the price cut would be a further burden on Sony's game unit in the short term since constraints on PS3's supply capacity will make it hard for the company to offset the lower per-unit revenue with a bigger volume. But the negative effect is likely to be limited since the price cut will be implemented only in Japan.'

The price cut will likely bring chaos to Japan because Sony will reportedly only have 100,000 units available at launch. Remember Sony sold nearly 1 million PS2 consoles in Japan in just the first three days of its launch in 2000. By the way, does anyone know what it entails to add HDMI connectivity? Is this reason to expect even tighter initial supplies?

Sony's ordinary shares fell 1.85% to close at 4,770 yen ($40.66 ADR equivalent). The Nikkei lost 1.26% to finish at 15,634.67. Sony's ADRs traded slightly lower yesterday closing at $41.46.

Sony Corp (SNE) 1-year chart:

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Disclosure: I do not own shares of any companies mentioned in this article.

Source: Sony Cuts PS3 Price in Japan, Adds HDMI Connectivity