Sony sidelines PS3 mastermind Kutaragi

Ken Kutaragi, the maverick Sony engineer behind all three generations of PlayStation games consoles, will on Friday become chairman and chief executive of Sony Computer Entertainment in a management reshuffle that underscores Sony's difficulties in the video games market.

The surprise move, though technically a promotion, removes Mr Kutaragi from the day-to-day running of Sony’s games division at a critical moment.

With the PlayStation3 only just past its difficult launches in Japan and the US, Sony is desperate to ensure that its complicated machine triumphs in the holiday shopping season. The company described the changes as “strengthening” its management line-up.

In the longer-term, the PS3 faces stiff competition from Microsoft and Nintendo and a European launch next March for which some analysts fear it is not fully prepared.

Replacing Mr Kutaragi as Sony Computer Entertainment’s global president and chief operating officer will be Kazuo Hirai, a veteran of SCE’s US division, who prematurely claimed four years ago that the era of console wars was over.

Investors know Mr Hirai as a slicker, more confident presenter than Mr Kutaragi. He is also understood to have stronger working relationships with American, European and Japanese games makers.

Analysts said that Mr Hirai’s promotion to a global role at SCE could mark a critical shift in management thinking, with Sony changing its emphasis so that the current generation of games console will be its last as a hardware manufacturer.

“The appointment of Hirai could be the start of a shift from hardware to software,” said Yuta Sakurai, an analyst at Nomura. “I cannot now imagine a PlayStation4.”

Mr Sakurai said that Mr Hirai’s new global portfolio puts a predominantly software-focused manager in charge of the company, adding that SCE’s future would be shaped by Mr Hirai’s relationship with Phil Harrison, the president of SCE’s worldwide studios.

Analysts argue that while Mr Kutaragi, a brilliant engineer, was the right man to run SCE as a hardware powerhouse, Sony may now see better opportunities as a pure maker of games.

Sony has taken a big financial risk investing in the PS3, and according to some estimates the company will still be making losses on the console for some years. Recouping that loss will depend on Sony’s own ability to make popular games, and to nurture close relationships with third-party studios.

Other analysts played down the significance of the reshuffle, arguing that Mr Kutaragi would retain tight control of the division he made so powerful within Sony.

Mr Hirai’s role, as KBC analyst Hiroshi Kamide sees it, will be to use his superior communications skills to smooth-over SCE’s relationships with third-party games companies – relationships badly strained by the repeated delays of the PS3 launch, and the limited number of machines available even now.

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