Sony game unit says plans to cut jobs in U.S.

By Nathan Layne

TOKYO (Reuters) - Sony Corp.'s (6758.T) game unit said on Thursday it planned to cut jobs in the United States and was eyeing restructuring steps in Japan as it struggles to keep up with industry rival Nintendo Co. Ltd. (7974.OS).

Sony Computer Entertainment, which makes video games and the PlayStation 3 (PS3) console, announced plans in April to cut up to 160 jobs in Europe, or 8 percent of its work force there, and said it would look to streamline its U.S. and Japan operations.

Sony's game division posted an operating loss of 232 billion yen ($1.91 billion) in the year ended March 31 due to hefty start-up costs for the PS3, a spec-heavy console that has been losing out to Nintendo's simpler but wildly popular Wii.

The game division's woes are well known to the market and have done little to dent Sony's share price, which hit a five-year high last month and is up 33 percent so far in 2007, handily beating the benchmark Nikkei average's .N225 5 percent gain.

Investors are still banking on Sony to regain its footing in the game market to recoup its investment and balance out a recovery that has largely been driven by cost cuts in its core electronics division and robust sales of flat screen TVs.

"For Sony to keep growing it really needs the game division to take off," said HSBC analyst Carlos Dimas.

Sony Computer Entertainment (SCE) spokeswoman Nanako Kato said it was not yet decided how many of its roughly 1,500 employees in the United States would lose their job as part of the restructuring. The game unit employs about 4,500 worldwide.

News of the layoffs leaked out through gaming Web sites. One, kotaku.com, reported on Wednesday that roughly 80 to 100 employees in the U.S. headquarters were laid off.

SCE is also looking at ways to make its Japan operations more efficient, though no concrete plans have been drawn up.

"We are taking another look at the company as a whole," Kato said.

Sony ruled the $30 billion global game industry over the past decade with the original PlayStation and PlayStation 2, but demand for the PS3 has been slow so far due to its high price tag and the limited availability of attractive software titles.

Investors are widely expecting Sony to make a sizeable cut to the PS3's $599 price tag to spur demand.

"There will be no improvement without a price cut," HSBC's Dimas said.

Launched late last year, the PS3 sold just 45,321 units in May in Japan, compared with 251,794 units of the Wii. In April, the ratio was four to one in favor of the Wii, according to Japanese game magazine publisher Enterbrain.

Nintendo, known for such game characters as Mario, Donkey Kong and Pokemon, also launched its latest console last year. The Wii features a motion-sensitive controller that allows users to direct on-screen play by swinging it like a tennis racket or wielding it like a sword, opening a new avenue of game playing.