Sony to Sell PS3 Chip Unit to Toshiba; Drops U.S. PS3 Price by $100

Sony Corp. will sell its "Cell" microprocessor output facility and "RSX" graphic chip production line to Toshiba for an undisclosed sum, part of the Japanese consumer electronics giant's latest attempt to unload 'non-core' businesses. The two facilities are integral to the manufacturing of Sony's PS3 video game console. Unnamed sources with ties to the matter say the price will likely top 100 billion yen (about $858 million). Sony and Toshiba had jointly developed the chips with IBM; they hope to complete the deal by March 2008. Industry insiders believe the purchase is somewhat risky for Toshiba, despite having both Sony and IBM as guaranteed customers, since it will require heavy additional investment going forward for a chip (the 'Cell') that has yet to be widely adopted. Separately, Sony said Thursday it was slashing the U.S. price of its PlayStation 3 consoles by $100 in the hopes of boosting weak sales in time for the holiday season. The $399 40-GB PS3 is now only $50 more than Microsoft's $349 entry-level Xbox 360, but is still $150 more than Nintendo's $250 Wii. IDC game-industry analyst Billy Pidgeon said the price drop should boost sales, but added a bigger impact will likely be made by stronger game titles due next year, including a new version the popular Metal Gear.

Sources: Wall Street Journal I, II, AP, Times Online [London], Reuters,
Commentary: Sony, Qimonda in Chip Joint Venture • PS3 and Backwards Compatibility: What the Analysts Are Missing • Cramer on SNE
Stocks to watch: SNE, TOSBF.PK, IBM
Earnings call transcript: Sony F1Q07 (Qtr End 6/30/07) Earnings Call Transcript

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