The problem is with the LCD and financial services divisions in Sony. The gaming division actually increased their guidance on the PSP from 15 million to 16 million this fiscal year. They did not adjust the guidance on the PS3 so it looks like they are confident in the 10 million number.

The appreciation of the yen has been killing their financials. The yen problem is going to create serious problems for Japan as whole since a majority of their economy is based on exports.

I am curious why Sony doesn't think they will be able to make a profit in the gaming division this year. It is most likely because the higher value of the yen, but maybe they are planning a price cut this year to counter MS.

Sony's big problem is this:

http://finance.yahoo.com/currency/convert?amt=1&from=EUR&to=JPY&submit=Convert
http://finance.yahoo.com/currency/convert?amt=1&from=USD&to=JPY&submit=Convert

During last year's holiday, a 400 € PS3 (about 330 € before tax) would give Sony about 55,000 yen in revenue. Right now, they get only 41,250 yen. From their perspective, that's almost like a price cut!

The US dollar hasn't dropped as much, but it still had a big drop (about 15%). If the exchange rates get any lower, Sony is going to lose a shitload of money in the holiday season.

ya, the dollar and euro taking a dive hurt most companies.

SONY is a too big a brand to be in such big trouble.

it is still the most trusted & like brand around the world....believe it or not.

Not Microsoft. Nintendo also gets hurt due to these currency movements, but their profit margins are much greater than Sony's so in absolute terms the impact is nowhere near the one Sony's feeling.

Nintendo has another advantage; they actually sell a lot of hardware and software in Japan, which is of course sold in yen and isn't impacted by currency movements.