Sony (NYSE: SNE) posted a loss last quarter. That was not what Wall Street had expected. Part of the problem is that falling stock markets hurt the company's securities portfolio. Maybe Sony should stick to consumer electronics and stay out of the stock market.

The only large division of Sony that really did well was its digital camera business.

Sony made a long-term error by believing its television business could push its earnings up. Price competition in that sector has knocked margins down. Sony had also hoped that sales of the PS3 would pick up. They have to some extent, but Sony has dropped the price on the product. That is hardly a way to drive operating profits.

According to The New York Times, "Sony aims to sell 17 million liquid crystal display TVs in the year to next March, up from 10.6 million in the year just ended." Of course, if it can't make money on all those TVs, the volume increase may not matter much.

Sony says the next year looks good, but that may well not be the case. It missed numbers in the quarter announced today, and the key engines of future performance are TVs and improved PS3 sales to eliminate the losses in the company's gaming unit.

Both of the businesses are critical to a turnaround at Sony but may not do well at all.

Douglas A. McIntyre is an editor at 247wallst.com.

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.

The Nintendo Ltd. (OTC: NTDOY) Wii and Sony Corp. (NYSE: SNE) PlayStation 3 were released within two weeks of each other, in November of 2006, as the latter two of the three "seventh generation" home video-game consoles, with the Microsoft Corp. (NASDAQ: MSFT) Xbox 360, released a year earlier, being the third. Now, a year and a half later, let's review how the two gaming machines stand up to each other.

Out of the gate, the Wii was a hit. It broke sales records, led by its revolutionary controller and Wii Sports, a silly mini-game compilation that came packaged with the console. The focus of the system was more on its unique game play, which Nintendo hoped would draw casual gamers, than its intense graphics abilities. The gamble paid off, as the Wii surpassed the Xbox 360, which was released earlier, as the top-selling console in September 2007.

The PlayStation 3 had no such luck at the start. The console's strategy, like the Xbox 360's, revolved around graphics, which made the system more expensive -- $499 for the basic PS3 at launch was double the Wii's $249 launch price. Sony also decided to intertwine the fate of the console with that of the next generation DVD technology the company backed, the Blu-ray disc. However, the release of the PS3 slightly predated the high-definition craze, and so having a Blu-ray player was not an important enough selling point to help the console at launch. Another issue for the PS3 at launch was the lack of a cornerstone franchise for the system. Xbox had Halo, and Nintendo, with its deep video-game roots, had Zelda, Mario, and Metroid. Without a "must buy" game or franchise, Sony was left out, and its PlayStations stayed on the shelves.

The theory makes sense. As the economy softens, Sony (NYSE: SNE), Microsoft (NASDAQ: MSFT), and Nintendo will cut the prices of their game consoles to keep sales volumes up. The CEO of game publisher Activision (NASDAQ: ATVI) has stated as much.

According to Reuters, "With the rising costs of fuel and food and housing, it is more difficult to go out and buy a $399 console, and I think it's going to put pressure on the console manufacturers to reduce their prices," Bobby Kotick said.

The problem presents a delicate balance for the console makers. Nintendo's stock has soared because of the popularity of the Wii. Microsoft just began to make money in its device division in the first quarter of the year. After a number of quarters of losses, it looks like the PS3 may start to contribute to the Sony P&L.

Holding prices may keep margins high, but drop unit sales.

There are two factors that work in favor of the console producers. The first is that, as their manufacturing volume has gone up, component prices have come down. That means if retail prices are lowered, the companies can still make money.

The other factor is that all three companies get licensing fees from each video game that is sold to run on its platform. With new offerings like Grand Theft Auto IV on the market, those fees should soften the blow of lowering hardware prices.

Watch for the price of game consoles to be dropped -- and soon.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

Take-Two Interactive (NASDAQ: TTWO), the troubled video game company, is releasing the new version of its popular game Grand Theft Auto IV. The product is expected to set all-time records for the sales of a single video game title.

The Wall Street Journal writes that one analyst "predicts first-week Grand Theft Auto IV sales could be more than $400 million. On Metacritic.com, which compiles game-review scores from dozens of publications, the PlayStation 3 version of the game had a 100 out of 100 score." In other words, it will sell like hotcakes.

Leaving aside the hostile takeover offer by Electronic Arts (NASDAQ: ERTS) to buy Take-Two, the potential sales of the game raise an interesting question.

Consumers pocket books are tight. A larger and larger portion of their income is going to food and gas as the price of those staples rises. Eating out and buying clothes from retailers has clearly dropped off. Many people don't have the money to buy the basics.

In the face of all that, Grand Theft Auto IV is expected to sell extraordinarily well. Microsoft (NASDAQ: MSFT)'s Halo 3 has already set sales records. Game consoles, the PS3, Xbox 360 and Wii are all setting sales records.

Either the consumer has a little more money than most analysts think, or the only thing they have money to do is sit for hours in their darkened homes and play video games.

Douglas A. McIntyre is an editor at 247wallst and the author of Ten Stocks Under $10.

After over four years and billions of dollars in losses, Microsoft (NASDAQ: MSFT)'s game division has finally started to make money. Although Wall Street was disappointed with some of the software company's numbers for Windows and Office, the firm's "entertainment and device" division made $89 million on $1.58 billion in revenue. In the same quarter last year, the operation lost $324 million on $936 million in revenue.

According to the company, "Cumulative console sales surpassed 19 million during the quarter, up 74% from a year ago. Server and Tools revenue growth of 18% added to its string of consecutive double-digit revenue." The Xbox has finally arrived.

The news shows that Microsoft is willing to spend massive amounts of money to enter a business and stick to it. When the Xbox was launched, Sony (NYSE: SNE) ruled the game business and there was no reason to think that Microsoft could do well. Gaming could not take advantage of Microsoft's core strengths in PC and server software. The move was an attempt at diversification.

After all the years of battling, the Xbox 360 now outsells Sony's PS3 in most months. If the software company could only make money on MSN.

Douglas A. McIntyre is an editor at 247wallst.com.

Sony (NYSE: SNE) is building a virtual community for video-game players who buy its PS3 video-game console. It has been delayed again, which may say something about why the Microsoft (NASDAQ: MSFT) Xbox 360 and Nintendo Wii tend to thrash it in the sales department.

According to The Wall Street Journal, "The service will let users create avatar characters, decorate homes and interact with other users in a virtual world." It was supposed to come out in 2007, and now it may be out late this year. Microsoft has had an interactive aspect to the Xbox for more than two years. It allows game-players to compete against each other over broadband connections. The Microsoft product also facilitates online chat and downloads of video games and movies.

Imagine if the Sony (NYSE:SNE) PS3 actually came out of the shadow of the Nintendo Wii and Microsoft (NASDAQ:MSFT) Xbox 360. During 2007, PS3 ran in third place in sales in most regions and most months. The machine was viewed as too expensive and did not have enough new games to run on it.

There is a case to be made that some of this could change. Production scale is moving up on the machine. That means lower component costs and another chance to cut prices. According to Reuters, "2008 will be a turning year for the PS3," said iSuppli analyst Pamela Tufegdzic. "Sony is offering a better forthcoming software pipeline with blockbuster titles like 'Gran Turismo 5,' which will boost PS3 sales this year."

Not so fast. Nintendo and Microsoft are not going to stand by and let their sales be stolen. Nintendo has already introduced a radical new platform called Nintendo Fit. It allows users to stand on a balance board and be physically involved in games that include things such as downhill skiing. Microsoft has its own arsenal lead by Halo 3.

Sony's PS3 may be in for slightly better times, but it is far behind in a race that it may never win.

Douglas A. McIntyre is an editor at 247wallst.com.

Nintendo officially launched a game in the US which has a feature that Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT) have yet to introduce. The Nintendo Wii Fit is aimed at gamers who want a little exercise. The new product may speak volumes about why the Japanese company has a sales lead over its two rivals.

According to The Wall Street Journal, the new product "comes with a weight-and-motion sensing device called the Wii Balance Board." Nintendo is also launching a service that allows video games to be distributed over the internet.

The Wii Fit will be introduced with games including one that gives the sensation of skiing.

While products like the Xbox 360 and Playstation 3 are based largely on the old model of a console that the user operates from a fairly fixed position, Nintendo has moved in the direction of gaming that involves the user participating directly in the action on the screen. The Wii Fit has sold 1.4 million units in Japan in a little over two months.

Now Microsoft and Sony have something else to worry about from the market leader.

Douglas A. McIntyre is an editor at 247wallst.com.

For years Playstation revenue carried Sony's (NYSE: SNE) earnings. The PS2 was one of the great selling consumer electronics products of all time.

Sony nearly failed with the launch of the PS3. Microsoft's (NASDAQ: MSFT) Xbox had taken too many customers and the Nintendo Wii became the world's top game console. Sony's CEO had to step down, and Sir Howard Stringer was brought in from the US to run the company.

Net income at Sony moved up 25% to $1.9 billion for the quarter ending December 31. Revenue rose almost 10%. Some of this is due to the fact that for the first time in years Sony's game division has finally gone into the black.

TV sales were the big winner for Sony during the quarter. Financially, the game unit, which includes PS3 only made a modest contribution. But it is no longer a drag on earnings. According to Reuters, "its game business swung to a profit after Sony cut production costs and retail prices of the PlayStation 3 game console and broadened its game software lineup."

Sony waited a long time for the PS3 to work out. That may be paying off.

Douglas A. McIntyre is an editor at 247wallst.com.

Sony (NYSE: SNE) said that sales of its troubled PS3 picked up over the holidays, selling 1.3 million units in North America. According to The Associated Press, this increased "the strength of the company's Blu-ray video format because the console also works as a Blu-ray player."

Perhaps that is part of the reason that the PS3 has not done better than its rivals, the Nintendo Wii and Microsoft (NASDAQ: MSFT)'s Xbox 360. Is the PS3 a Trojan Horse for Sony's HD video strategy or is it a game platform?

Part of the problem in selling the PS3 has been what the consumer had to pay to play. Until the recent price cuts, it was more expensive than the Xbox 360 and twice as costly as the Wii. This almost certainly undermined unit sales. Without a Blu-ray player as part of the hardware, the game console could probably have had a cost base which was much lower.

Sony may have hurt the ongoing marketing of its gaming product by "mixing" it with the company's plans to dominate high-definition content playback. The PlayStation was once the consumer electronics company's flagship and was highly profitable. Now the game unit loses money.

Sometimes two goals from one company put into a single product just creates a mess.

Douglas A. McIntyre is an editor at 247wallst.com.

Nintendo has done extraordinarily well with its Wii game console. The Wii regularly outsells Sony (NYSE: SNE)'s PlayStation 3 and Microsoft (NASDAQ: MSFT)'s Xbox 360. But, the most successful Nintendo product is the older DS which, according to The New York Times, outsold the Wii, 1.53 million units to 981,000, in November, based on sales figures compiled by NPD Group.

What makes the figure more interesting is that the Nintendo DS is three years old. The DS is compatible with older Nintendo games, but does not have the "hot" new features of current devices like HD TV playback.

The success of the DS may point to a "rotation" in the video game sector, and that is a movement away from expensive and complex machines that have multiple functions, high prices, and harder to understand features. Keep it simple, stupid.

It would make some sense that the market for large, complicated machines would be limited. Playing video games appears to be of interest to a broad section of the population, but reading 300-page instruction manuals probably is not.

Douglas A. McIntyre is an editor at 247wallst.com.

A rising tide lifts all ships. Sales of game consoles moved up sharply in November. There had been news from comScore and other research firms that electronic game sales were ahead of all other e-commerce purchases, but no one was certain what was happening in the bricks-and-mortar stores.

Video console sales were so good last month that even the Sony (NYSE: SNE) PS3 did well. Sony did cut prices on the PS3, but why shouldn't it benefit from that? According to MarketWatch, "sales of game software in North America soared 62% to $1.3 billion for the month, according to data released late Thursday from the NPD Group."

The numbers were spectacular. PS3 sales rose to 466,000 from October numbers of 121,000 units. Nintendo's Wii jumped to 981,000 from 519,000 during the same period, despite shortages of the units. Microsoft's (NASDAQ: MSFT) Xbox 360 sales moved up from 366,000 to 777,000, perhaps helped by the recent launch of its "Halo 3" game.

Whatever the reason, video games are the hot property this holiday season. No other category appears to be growing as fast.

Why? Perhaps the major reason is that a video game console can be bought for about $500. The new ones can be used for both games and HD DVD playback. In other words, they are a versatile and relatively inexpensive product.

In a holiday season when the consumer may be feeling a little pinched, what better gift than something almost everyone can play with. And, it is a lot less expensive than a pony or new car.

Douglas A. McIntyre is an editor at 247wallst.com.

Sony (NYSE: SNE) has not had an easy time selling the PlayStation 3, so the company will now focus on making the game console a networking hub connecting the internet and electronics devices in the home.

According to Reuters, "The world's second-largest consumer electronics maker will hook up the PS3 with its PlayStation Portable console online before extending the links to other products such as mobile phones." The PS3 will also be a connection to flat panel screens in the home.

In some ways, Sony is using its leverage with it popular flat panel TVs to help sell the PS3 as a conduit into the larger video screens.

If it sounds like a complicated, backwards strategy, it may be because it is. The company's push to use its consumer electronics to sell the PS3 as the "brains" of the living room would only appear to be something that will alienate people who have no interest in a home entertainment "system." That would probably be 90% of the people who like to watch TV or play video games. At least those activities are easy to understand. Nothing to plug together.

Douglas A. McIntyre is an editor at 247wallst.com.

Nintendo will not make enough of its Wii game consoles to meet holiday demand. That may help sales of the Microsoft (NYSE: MSFT) Xbox 360 and Sony (NYSE: SNE) PS3.

The Wall Street Journal argues that because Nintendo started as a small family business and has had its share of ups and downs, it is inclined to take very little risk with inventory. That can cause it to miss a big up-tick in demand. The paper writes, "Because Nintendo puts a great deal of focus on cash flow, it tries to keep its inventory as low as possible. Such a strategy is rare among Japanese companies, which have tended to focus on revenue growth and market share."

Nintendo says it was just caught short and did not foresee the big demand for the Wii.

Some experts and observers, however, think that the Nintendo Wii shortage may be by design. Having customers looking all over town for a hot product may build a sense that it is a "must have" item.

The idea that the shortage is by design is probably right. Wall Street would have to assume that Nintendo was very poorly run if it was actually caught so short on the availability of its most important product. The Wii outsells PS3 and Xbox 360 by such a large margin that giving up a couple of share points may not hurt, if the company has a plan for next year.

In 2008, Nintendo plans a number of new upgrades to the Wii, and several games for the platform will come to market. Having customers waiting for the Wii may not be a bad idea.

Douglas A. McIntyre is an editor at 247wallst.com.

According to November sales figures just released, the Nintendo Co. Ltd. (OTC: NTDOY) Wii gaming console was outsold in Japan by the much pricier PlayStation 3 game console made by Sony Corp. (NYSE: SNE). The exact opposite has been happening in the U.S. market for the entire year of 2007, but it did take Sony until the later part of the year to surpass Wii sales. Will it last in Japan?

This research comes from market research firm Enterbrain, which said that the PlayStation 3 outsold the Wii in the last three weeks of November. What this indicates is that Sony's new push into a lower-priced entry for the PlayStation 3 may in fact be helping it bring in sales.

Pricing moves seem to always do this when it comes to consumer electronics. In October, Sony cut the PlayStation 3 price and then followed up that welcomed move with a new bundle in November that brought the price down to under $400. With the holiday season in full swing, this was timed perfectly, although even the newer PlayStation 3 price is way ahead of the $250 price of the Wii.

While the Nintendo Wii sold over 150,000 consoles in November, the PlayStation 3 has totaled over 183,000 unit sales so far. In third place was the Microsoft Xbox 360, which has sold over 35,000 consoles in Japan through the end of November.