Sony’s New Playstation 4 Leaves Many Questions Unanswered

Michael Teague |

Sony’s Unveil of New Playstation 4: Peeling an Onion?Sony (SNE) hosted a two-hour event in New York on Wednesday to unveil its upcoming new Playstation 4 game console.  The problem is, for all the fanfare, no actual console was unveiled.  Thursday’s market response seemed to indicate disapproval in more ways than one: with the company’s shares down almost 3 percent to $14.05 by midday, one of their main competitors in the gaming console business, Nintendo (NTDOY), actually saw their shares spike by 2 percent to $11.79.

Sony’s big event was problematic for a few reasons.  Not only did investors and consumers get no indication of what the new console would look like, prompting questions about whether or not the device would even include an optical drive for DVD, Blu-Ray, and game discs from previous Playstation models, the company provided no information about how much the new device would cost or when it would be released.  It did not help matters that the company also announced that PSN games for the Playstation 3 will not carry over to PS4, causing a headache for customers in the form of lost money and time.

What’s worse is that the company is facing stiff competition on a variety of fronts.  First and foremost of these is the increasing popularity of online gaming, enhanced by the compatibility of this format with also increasingly ubiquitous mobile devices like smartphones and tablets.  This has not only made gaming more convenient, but also more widely available and appealing to a much larger audience. Game companies like Electronic Arts (EA), a company that was once dominant in the video game market, has been making significant strides in online gaming (up a quarter of a percent by midday to $17.52).  Thursday also saw EA’s stock also upgraded to “outperform” by Macquarie Capital, which cited that the company could expand margins with improved cost controls and infrastructure.

Sony’s response to this, with regard to the PS4, has been its very recent acquisition of Gaikai, but since they just recently purchased the online cloud company, it is unclear how soon PS1, 2 and 3 games will be incorporated into their streaming service. Either way, thousands of hours of saved games on the current Playstation+ streaming technology could be lost in the crossover.

And then there is Microsoft (MSFT), who is expected to offer the newest version of their Xbox sometime this year, and could really stand to benefit from the baffling errors and omissions that occurred as part of Sony’s product not-quite-release event Wednesday, as well as their own ingenuity. Add to this companies like Apple (AAPL) that are expected to unveil major products in streaming television this year, and the outlook could really be worrisome for Sony’s new game console.

One final consideration is the brand new company Ouya and their game console which is slated for a June release this year, with 500 games already in place.  Funded almost entirely from Kickstarter donations, their console will play Android games, they promise a new model every year for only $99, and their games will be significantly less expensive that any Playstation disc.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 112.12 1.09 0.98 27,068,316
BECN Beacon Roofing Supply Inc. 46.81 0.24 0.52 518,568
SNE Sony Corporation 29.16 0.55 1.92 2,029,024
MSFT Microsoft Corporation 61.01 -0.36 -0.59 21,220,753

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