Merill Lynch's Japan-based analyst Hitoshi Kuriyama predicts delays of Sony's PlayStation 3 gaming console of 'between 6 and 12 months, with the result being an autumn launch in Japan and a late 2006 or early 2007 launch in the U.S.'
Merill's US analysts say that it's now clear that the console is 'prohibitively expensive to make.' Their latest analysis of the bill of materials finds the PS3 costs about $900 apiece to Sony. The runaway expenses are tied in particular to the PS3's much-heralded IBM Cell processor and BluRay DVD drive.
In a note to clients, Merill Lynch's Joe Asha outlined what the implications of such a significant delay would be to other companies that are highly exposed to the console:
● ATI (ATYT) to benefit. from potential PS3 delay. Sony’s problems with PS III are positive for ATI in our view, as ATI is the sole supplier of graphics technology to the [Microsoft] Xbox360.
● NVIDIA’s (NVDA) royalty stream at risk. Our estimates for NVIDIA could be in jeopardy if the PS3 ramp is pushed out. Currently we estimate NVDA will earn $78 million in revenue from Sony in calendar 2006 through a combination of software license fee, non-recurring engineering revenue, and royalty revenue. We are now modeling unit shipment of only 4 million in 2006. While the company seems optimistic that a delay ramp will have minimal impact this fiscal year, we think the absence of a significant PS3 ramp could hurt NVIDIA’s progress towards the corporate gross margin target. We also think there may be a longer term impact if PS3 loses its competitiveness to Xbox360.
● Marvell (MRVL) has about $8 in PS3. We believe Marvell supplies WLAN, GigE, and SATA ICs into the Sony PS3 and estimate that MRVL's content in this console is about $8-$10. We are currently modeling MRVL's
