PlayStation 3 Could Change Game for Sony

Updated from 2:28 p.m.EST

Sony (SNE) could slash the price of its PlayStation 3 by 35% in 2009 as the home video game console struggles against other competition.

According to technology-research firm iSuppli, Sony has reduced the cost of producing the PlayStation 3 by 35%, as the second-generation console features 30% fewer individual parts than the previous model. While the previous generation PS3 was sold at a significant loss, which Sony made up for through game title sales and royalties, the new version may help stop the hardware losses.

"With its new-generation PS3, Sony has come closer to breaking even, although it probably hasn't quite reached that mark yet," said Andrew Rassweiler, director and principal analyst of teardown services for iSuppli. "With iSuppli's estimated PS3 cost at $448.73, the product retailing in the United States at around $399 and taking into account other expenses, the PS3 may be able to break even in 2009 with further hardware revisions."

Wedbush Morgan Securities analyst Michael Pachter says that despite the cost reduction, Sony would not cut the price of the PS3 until after the end of the company's fiscal year. He argues that such a move doesn't make sense immediately following both the holiday season and news that Sony would slash 8,000 jobs as it aims to cut costs by $1.1 billion a year due to the economic crisis.

"My guess is that they will cut April 1, which is the day after the end of the fiscal year," Pachter said. "To cut $50 after Christmas doesn't do that much for you. Potentially, Sony could sell 3 million more units at a $50 incremental loss each. That's a $150 million loss, which is hard to reconcile with the job cuts the company has announced."