PlayStation fault hits Sony shares

Sony is pinning its future profits on PlayStation

Sony's shares rebounded on Tuesday after plunging because of problems with its PlayStation2 console.

The stock had fallen following a statement that the new game machine had faulty memory cards.

That and other factors meant Sony shares had dropped every day since the launch of PlayStation2 on 4 March.

Part of it was down to profit-taking, but the technical problems with the console caused the biggest falls.

High expectations

The stock had lost a quarter of its value since reaching a record high of 33,900 yen at the beginning of March.

On Tuesday, the slide was halted with a 4.49% rise, up 1,090 yen to 25,390 yen.

"The memory card flaw came as a disappointment as expectations had been so high for the new game console. Investors want to see how Sony deal with the problem," said Kazue Mayuzumi, a broker with Nikko Securities.

Sony said that plug-in memory cards on PlayStation2 machines had occasionally erased game data or corrupted programs running the digital video disk (DVD).

Customers have been invited to send faulty consoles back for replacement, but a Sony spokeswoman said no other action was being taken.

Sony's future profits centre on the PlayStation2, which it hopes will keep it at the top of the lucrative video games market.

Microsoft competitor

Sony's aim is that the console - expected to be able to hook up to the internet from next year - will eventually rival the personal computer.

But Microsoft's announcement last week that it plans to launch the X-Box, a direct competitor to the PlayStation, has also affected the share price.

There is further concern about the plan to split Sony stock in two at the end of this month, a move which will double the number of shares while halving their price.

But some analysts believe Sony will bounce back.

DVD selling point

"Sony has a lead on all of its game making competitors, and provided they address the technical problems with PlayStation efficiently, Microsoft shouldn't pose such a big threat," said Alisa Spicer of ING Barings in Tokyo.

Nearly one million PlayStation consoles were sold in the first three days after the launch in Tokyo.

One of the console's selling points was the inclusion of a DVD player and with a $362 price tag it offered a competitive alternative to many of the stand-alone DVD players already on the market.

But because the company has had only 340 complaints so far, and because it is a memory card fault and not a software problem, many analysts believe sales of the PlayStation will not be affected.