Sony shares rise as it plans to cut PS3 costs

Sony Corp. Friday said it plans to soon do away with a key microchip from the European version of its PlayStation 3 (PS3) game console, which will help cut down on production costs and also reduce its compatibility with older generation games.

Sony shares jumped up 3 percent by mid-afternoon with the spread of the news regarding the latest move by the Tokyo-based Electronics and Entertainment Company. It is believed that this step will help Sony turn its PS3 operations profitable.

Following much hyped launches in North America and Japan late last year, the PS3 is set to go on sale in Europe on March 23.

Though the version of PS3 that is currently being sold makes use of a chip that offers graphic and data-processing functionality for PlayStation 2 games, its European version will use a chip that will not offer graphic- and data-processing functions for PS2 games.

The backward compatibility of the machine will be lowered, said a spokesman for Sony Computer Entertainment (SCE), Sony's game unit. It will still carry a different chip that processes graphics for PS2 games.

SCE will distribute compatibility software on the Internet so that users can play PS2 games on the PS3, it said. According to an estimate of industry analysts Sony is losing between 30,000 to 40,000 yen on each PS3 game console.

The projected losses at Sony’s game unit would sum up to 200 billion yen ($1.7 billion) in the fiscal year ending March 31. Sony said games consoles sold between September 2007 and March 2008 should be turning a profit, a report in The Nikkei said.

Shares of Sony went up 3 per cent in Tokyo trading Friday.