There wehre quotes from interviews at CES08 from some sony exec that Sony are trying ( but cant promise due to the competition) to get te PS3 to stop making a loss by the end of its next finanical year ( which starts March08 and finishes in 09) 

My personal opinion is that Sony are still taking a hit on the PS3, maybe 50-70USD per unit. and could make a profit IF MS doesnt reduce the cost of the Xbox360 by more than $50USD this year. MS hasnt stood still either with cost reductions, and even after thier price reductions through 07 are still making a good profit on the machines sold. MS has done a good job at shifting revamped RROD machines, and I feel the inventory is starting to clear. Lookout for MS giving a price reduction in the first 1/2 of 08.

Sony has a long way to go if they want to catch or stay with microsoft this generation as the sales lead of microsoft hasnt changed that much over 07 

Lets say Sony stuck to their guns all last year and kept the prices of PS3 at $500-600..

They would have sold around 6 Million PS3's...Maybe less

But they slightly modified the PS3's guts and lowered cost and are losing even more money.

So you could say Sony did an alright job improvising with their mistakes.
But are losing even more money.

Taking the $400 cost of production estimate per console as near actual cost of production still equals a loss per console to Sony as delivered to the consumer since retail outlets aren't buying them for $400, it costs money to ship/distribute to warehouses and then retailers.

What most people are overlooking is that Sony just cut about $250 off the cost of production (lower cost of parts, fewer parts, streamlined production) over a one year time span. By over $400 if the report is correct. With the price drops, a large percentage of those price savings were passed directly to the consumer. Not because Sony loves its customers, but because they want to move more product and increase market penetration. Not that anyone cares; it just means you can get a PS3 for $400 instead of $600 to them.

With the high amount of custom parts included in the PS3 (such as the blu-ray diode and CBE), it costs more initially to manufacture, and less over time as those custom parts become cheaper to manufacture and are produced and purchased in greater volumes. As quality control improves (not as shipped, but as they roll off the assembly lines to pass clearance by QC), costs are reduced further. Sony's been doing this for the last ten years, I don't know why anyone finds this so hard to believe.

I don't think most people disagree with the concept of decreasing production costs. However most companies are able to show increased profit after lowering production costs. But Sony dug such a deep hole that all they can show is decreased loss or at best break even after two years.

As long as they release those games people are waiting for they shouldn't any problem reaching their goal.

This is just funny now. Why is it that people want the PS3 to be losing money so bad? Its like you all forget that SONY OWNED GAMING FOR 7 YEARS! They know what they were doing, its not like they made the PS3 and then said "oh shit, my bad, that was a complete mistake."

They messed up a few things, but blu-ray was the main cost. I think the cheapest Blu-ray player was like 1,000 when the PS3 came out wasnt it? Now its sub-$400, yet no one believes that Sony cut costs?

The production costs have come down much more than $100 dollars since launch. They have also taken some production parts of of developement, and cut down production errors. You dont have to believe it if you dont want to, just know that it is very likely that Sony will reach $299 this year.

 First of all, kudos to Just_Ben for finding the source of this, and giving it some authority to be believable.  And kudos to Sony for driving down their cost per machine by that impressive amount.

BUT...  The analyst, Kota Ezawa, also says,  "he doesn't expect the business to be prosperous until late 2009".  Which, of course, includes any profits from PS2, PSP and any profitable games.  How can that be if the cost is now only $400?

Well, like some people have said, first of all, that manufacting cost is probably the 40g version.  While the 80g parts' costs are a lot more, it will still cut into the extra $100 of the sales price.  Next, looking at it from only the 40g unit, they aren't getting $400.  Close, but probably only on average, $396.  Do they give a discount for paying early?  If so, there is another $4, down to $392.  (or if no discount, they don't get their money as fast from the store customer).

Back on the cost side, there is the depreciation cost.  Sony will want to make back enough money to build a new factory to produce the PS4.  What they have spent to build the factory for the PS3 is charged against each unit as depreciation (basically), to show that extra cost.

There are selling, general and administration expenses.  How much?  The 2007 annual report said that the Game segment ratio of these expense to sales was 20%.  That's $80 per unit. 

Net it out and it's $392 sales - ($400 + 80 + 20) = ($108) loss per unit.   (the $20 is my est. of depreciation, freight charges, other misc.)  Which is why Kota doesn't expect the business to be 'prosperous until late 2009'.  

Any price cut(s) would push out that date.   With losses estimated to total $3.5B for last year and this year, and breakeven in 2009, means that the PS3 won't be digging out of its hole until 2010.   Taking that 'prosperous until late 2009' means still small losses in early 2009, giving the year a near net zero.  I would suppose he is figuring in how long the PS2's profits will keep propping up the division.  

To those that say the 3rd quarter will tell us a lot more.  Not really that much.  Yes, you'll have Cost of Goods Sold and such, but with the PS2, PSP and games mixed in, we won't be able to tell how much of each one gets how much costs.   About $1B has been lost in the first two quarters as I recall.  This holiday quarter had better show very low losses, since it is during this quarter that you usually make a lot of your money.  And his estimate was a loss of $1.4B, so not that much room if the 4th Q in the spring will also lose a bit as well.

WOW, that was faster that I expected.

I doubt we'll see a price cut before November, around black friday in the US.  When Sony says they expect to make a profit on PS3 hardware AND software by mid 2009, that tells you there is no way they are profitable on just the hardware right now.  Wishful thinking.  

Speaking of the source, Nikko Citigroup has a buy rating on Sony. Don't make me repeat my rant on analysts.

http://uk.reuters.com/article/companyNews/idUKT28E0AO0M20071228?symbol=SNE.N

It's also interesting that another analyst at Nikko Citigroup says the following:

In the five years to 2012, Soichiro Fukuda, analyst at Nikko Citigroup, expects the Wii to capture a 46 per cent global market share, compared with 33 per cent for Microsoft's Xbox360 and 22 per cent for the PS3.

http://www.ft.com/cms/s/0/a5342166-a39f-11dc-b229-0000779fd2ac.html?nclick_check=1