Analysts divided on PSP launch

Sales of Sony's new portable underwhelms one analyst, while another predicts eventual victory over Nintendo in the handheld space.

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Just one week after the PSP launch, the industry is already writing its reviews.

Yesterday, in an interview with GameSpot News, Electronics Boutique CEO Jeff Griffiths called the PSP a "revolutionary product that is going to greatly expand the portable business," as well as the entire game sector.

This morning, two analysts chimed in with their own thoughts. One memo from American Technology Research's PJ McNealy gave his assessment of the launch, which he describes in cautious terms. "[The] PSP [launch] has been solid but not spectacular."

"To put this in perspective," McNealy added, "while the PSP has been launched amidst much hype, the expected financial impact on the video game publishers for the March quarter has been minimal and, in our opinion, is more of a case of headline risk than actual material impact right now."

While not a definitive measure of success, McNealy pegs his assessment on ATR's own channel check of stories. "Our checks over the past two days of 150 US retailers have shown that the PSP is sold out in only 50 (33 percent) of those stores."

"We are frankly surprised by the early channel and industry checks on sales," McNealy said. He refrained from offering any long-term determination, stating, "We are hesitant to draw any macro-level conclusions about the success or failure of the PSP."

McNealy is calling sell-through at 4.5 to 5.5 million units in North America.

UBS analyst Mike Wallace, on the other hand, looks at the long-term impact of the PSP in his lengthy Video Game Industry Overview released today. He sees sales of the unit reaching 4 million or higher for the full calendar year, depending on allocation of supply between North America and Europe.

That said, Wallace does see potential snags in the mostly positive outlook. "Given the tight supply now, the probable redirection of units toward Europe for its expected June launch, and the problems Sony had last year with PS2 production, we will not assume that Sony can produce as many units as people expect."

How do the analysts see sales after the early hype subsides? Wallace picks the Sony portable as the winner in the portable space. "We think the PSP will be the dominant handheld gaming device in two years."

Griffiths, too, sees a big win for Sony. After a "great start," Griffiths sees Sony up to its old tricks of evangelizing into an older and more monied market. "Prior to [the 1995 PlaySation launch], it was primarily a console-driven business for kids and teens."

With the original PlayStation Sony brought more mature-themed software to market and generally targeted older teens and 20-somethings, vastly changing the video game playing field. Griffiths sees Sony doing the same with the PSP.

"Sony's come out and said their target customer for PSP is 18- to 34-year-olds. And that's really what they did with the original PlayStation. That's what grew console business from being a $2 to $3 billion a year business in the US to what it is today. I think we have the same opportunity here with portable."

Even McNealy saw a bit of sun peek through the cloudy launch, conceding that "the PSP launch, while not the blowout event expected, will be considered successful, as retailers continue to sell through existing inventory levels."

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