Retailers feel discomfort of wait for new console

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The delay to shipments of Sony’s PlayStation3 has implications well beyond the Japanese electronics company’s factory gates.

Europe – often the last large market to see new products – will now have to wait once again, causing discomfort to retailers hoping to be selling PS3s during the bumper Christmas period.

Game Group, one of Europe’s biggest video games chains, had been wary about depending on significant PS3 sales while rumours continue that the console would be delayed.

However, the retailer said in July that it expected to see the start of profits from the PS3 in the second half of the year.

Game, the leading independent video games retailer in the UK and Spain and the number two in France and Sweden, had expected an initial 50,000 consoles this year for its principal UK market.

Simon Davies, an analyst at ABN Amro, said the delays would immediately wipe off about £5m ($9.4m) from next year’s profits. But he said that, since some consumers would buy a rival product such as Microsoft’s XBox 360 or Nintendo’s Wii, the overall impact would be to reduce profits by about 12 per cent, or £3.2m.

Included in the downgrade is a reduction in sales of games – for which retailers enjoy higher profit margins than on consoles. “We would expect everyone buying a console to buy three or four games in the first few months,” said Mr Davies.

The bottleneck in supply of the blue laser diodes – the crucial element that allows Blu-ray discs to write and read much more data than conventional alternatives – is also stunting companies that have backed the technology.

Lite-On, a Taiwanese electronics maker, has had to delay shipments of its PC drives that write data in the Blu-ray format. Sony itself is one of the few manufacturers able to produce the laser diodes and it has had to restrict supplies to third-parties such as Lite-On as it attempts to equip its own PS3s.

“As far as Lite-On is concerned, we are also facing a shortage,” said Jelmer Feldman, European marketing director. “Sony needs a lot of these components for its PS3 launch.”

While Lite-On expects to send its first shipment of PC hardware at the end of the month, this will be in lower numbers than anticipated. For all the companies willing to support Sony in the launch of Blu-ray, the supply crunch is proving painful.

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