The financial news at Sony Corp. (NYSE: SNE) just won't stop raining red. The world's second-largest consumer electronics company reported a 47.4% drop in profit for its first quarter. The disappointing quarter was partially blamed on lower cellular handset sales from its part in the Sony Ericsson joint venture, but there's more here.

Sony's CEO, Sir Howard Stringer, continues to be someone who just doesn't get it. Sure, he's made smaller cultural changes at the electronics maker, but it's being eaten alive in the flat-panel television segment by competitors like Samsung and Vizio. Sony did say that flat-panel TV sales were down in China, although it did not comment about other regions that may have seen a dip.

With the economy in the U.S. in a precarious position, it would be interesting to see what flat-panel TV makers were selling more TVs than Sony beyond the above-mentioned brands that seem to have better marketing and lower prices than the Japanese icon. In terms of portable electronics, Sony's grasp on maintaining proprietary storage formats on its digital cameras and others make it a laughing stock in the tech consumer world.

And then Stringer tells the world that the Nintendo Ltd. (OTC: NTDOY) Wii is a "niche gaming device." Is Stringer completely out to lunch? The Sony Playstation 3 is a niche device that just happens to have a Blu-ray disc player in it (which is the unit's saving grace among non-gamers). The Wii continues pummeling the Playstation 3 in monthly sales, which could not be done by a "niche" device. Sony will continue to be marginalized in certain product segments if its head honcho and corporate culture continue seeing the competition in such menial terms.

Most Americans are giving their tax rebate to Exxon Mobil (NYSE: XOM). It should hardly be surprising that with oil at around $130 and the prices of most commodities used to make food doubling over the last year, the the money from Uncle Sam will not go for a new PlayStation.

The tax rebate was meant to stimulate the economy. Instead, it may be going to a fairly narrow group of companies including credit card firms and oil behemoths. That was hardly the plan, but, in an odd way, the government's program to get money to the consumer may be fueling inflation, at least in the energy sector.

The more the consumer spends on gas, the more likely it is that gas prices will stay high.

According to The New York Times, "Recent surveys underscore that many households are now too worried about the rising cost of driving and eating to spend freely, even as cash lands in their laps."

It is the law of unintended consequences at work, meaning that money back from the Treasury may do nothing to make the economy better.

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

Anyone who did not think a Microsoft (NASDAQ:MSFT) buyout of Yahoo! (NASDAQ:YHOO) has become less likely should have stopped by the All Things Digital conference. According to Reuters, "Yahoo Inc Chief Executive Jerry Yang said on Wednesday a potential deal with Microsoft has tremendous power, but the software giant appears no longer interested in a full merger."

The leaves Yahoo! management, its board, and takeover artist Carl Icahn in a tough spot. Many analysts believe that without a deal, the Yahoo! shares could drop back near $20, where they traded before the offer from Redmond. Yahoo! currently changes hands at $27.

The news is a sign that Microsoft thinks it can do almost anything on its own, including challenging Google (NASDAQ:GOOG) in the search business. Gates, Ballmer & Co. have the money to get the engineering hands on board to push better search tech, but user loyalty to Google may be so great that even a much better product from Microsoft will not break its rival's hold on the market.

Microsoft has had success exceeding the market's expectations before. No one believed that the company's Xbox could challenge the Sony (NYSE:SNE) PlayStation franchise.

But, search engines are not game consoles and the rules in one game do not necessarily apply in another.

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

Activision Inc. (NASDAQ: ATVI) doesn't want to let Rock Band have all the fun. According to Reuters, Activision wants to turn its Guitar Hero platform into a truly direct competitor to its colleague. Come the fall, the publisher will release Guitar Hero World Tour, a package that will include a guitar, a microphone, and a drum set. There will be online capability; players will also be able to create their own tunes via a suite of digital-music tools. And all the major platforms from Sony Corporation (ADR) (NYSE: SNE), Microsoft Corporation (NASDAQ: MSFT), and Nintendo Co., Ltd. (OTC: NTDOY) will be getting this game.

Rock Band, which is developed by Viacom, Inc. (NYSE: VIA)'s Harmonix and sold by Electronic Arts (NASDAQ: ERTS), is no longer unique now that Activision has expanded the depth of its famous brand. Indeed, Guitar Hero still thrived even in the face of Viacom's music game, but it looks like Activision is taking no chances; the publisher obviously realizes that, as time goes on and upgrades to Rock Band come along, the Guitar Hero franchise might see eventual erosion of its fan base as the fad matures. Evolution would certainly be justified at this point.

Yet, I am of two minds about this move. On the one side, I can understand why this had to be done. And I can see why it should work out; after all, Activision's brand equity when it comes to this Guitar Hero game is incredible. Seriously, if you don't know, a lot of players out there, both hardcore and casual, love this platform. However, there's another side to me that wonders if traditionalists won't necessarily enjoy the aspect of the additional instruments. Do they add value, or do they now make the brand seem clunky and complicated? On a gut level, I always theorized that those who chose Guitar Hero over Rock Band relished the fact that it was just one guitar. Then again, going back to the brand-equity thing, maybe current players will now want to try out a more complex musical-gaming experience since the Guitar Hero name is attached.

In a column in Barron's (subscription required), analyst Todd Greenwald provides a bullish outlook for the video game industry, macroeconomic trends be damned:

We believe that this industry is virtually recession-proof and will be driven almost entirely by the release of new games, and continued hardware sales, rather than any macro-level consumer spending trends.

Last year's momentum has continued into the first half of 2008; year-to-date software sales are up 41% in the U.S., following 34% growth last year. Furthermore, this will likely accelerate in the coming months, driven by the releases of Grand Theft Auto IV, Nintendo's Mario Kart Wii and Wii Fit, and Konami's Metal Gear Solid 4.

I tend to agree with the notion that video games should be pretty recession-resistant -- they just aren't that expensive for the amount of time that so many young, male hardcore gamers spend with them. There's an argument to be made that a $50 video game actually provides a positive return on investment to the consumer because a night at home playing PlayStation in your underwear is cheaper than a night out on the town.

But one word of caution: Much of the growth, especially in more casual games like the Nintendo Wii, is being driven by a growing number of non-hardcore gamers. People who don't consider video games their main hobby may be more likely to give them up if things get tight.

Another problem to keep in mind: the Associated Press recently reported that teens are having a tough time procuring summer work in light of the struggling economy. That means less spending money for video games. But teen-oriented fashion retailers are more likely to be the victims of that.

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.

Nintendo (OTC: NTDOY)'s Wii gaming system is truly a craze that has swept many nations. Older generations like the physical aspect to the games. Younger generations love it. Even people who have never liked video games (yours truly included) are fascinated by the technology. And 13 months after the Wii was introduced in November 2006, it remained one of the hot-ticket items for the holidays. Lines were long, eBay Inc. (NASDAQ: EBAY) prices were through the roof, and demand was insatiable.

The continued success of the Wii (and the DS portable game device) helped lift Nintendo Co. profit to 258.9 billion yen (or $2.43 billion) in the April-December reporting period. This compared quite favorably to the 131.9 billion yen earned in the previous year. Sales were 85% higher during the nine-month period to 1.32 trillion yen.

The Wii has outsold its primary competition: the Sony Corporation (ADR) (NYSE: SNE) PlayStation 3 and Microsoft Corporation (NASDAQ: MSFT)'s Xbox 360. In fact, 18.5 million Wii units are expected to fly off the shares this business year, which ends March 31. This is above Nintendo's October forecast of 17.5 million units. Even with an economic slowdown in the air, the Wii is one device consumers are willing to pay for. Additionally, the company boosted its overall sales forecast to 1.63 trillion yen from 1.55 trillion yen. In the previous year's reporting period, company sales hit 966.5 billion yen.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Here's a sure sign that a product is a hit: a market develops for call options on it. People actually fork over money for the right to buy something.

According to CNBC, that has happened with the Nintendo Co., Ltd (ADR) (OTC: NTDOY) Wii: "Here's the m.o.: shoppers get wind of when a Wii shipment is due to arrive, either by greasing a store manager, or by watching ads carefully, and begin lining up hours before the store opens. A store employee will then come out, hand out tickets or numbered placeholders to keep things orderly, and then the buying and selling begins."

Those tickets to buy Wii's can, according a Best Buy employee interviewed by CNBC, fetch $300-$1000. The ticket is only good for the first few hours the store is open.

To make it more interesting, some people buy the "options," acquire the Wii's ... and then list them on eBay.

For years to come, the Nintendo Wii will probably be the video game success story by which all other future consoles are measured. Look for other companies to copy Wii in the next few years with more user-friendly, less arcane, games, and also possibly exercise components.

The video game industry appears to be dividing into two groups: casual gamers who enjoy the fun of the Wii, and hardcore gamers who want graphics like Sony Corp. (ADR) (NYSE: SNE)'s PlayStation 3.

As some point, I think companies could actually introduce two systems during each product cycle -- one for each market.

In some ways, Wall Street should be surprised that it did not happen sooner. Apple (NASDAQ: AAPL) is talking to cellular carriers about launching the iPhone in Japan. In the country that created the Walkman and PlayStation, it would seem only logical that a tech gadget like the iPhone would be a huge success.

Japan is known for its obsession with cellphones. It is a large market for text applications and ringtones.

The Wall Street Journal writes that Apple is in talks with NTT DoCoMo (NYSE: DCM), the largest carrier in Japan, and Softbank. The Japanese market has "nearly 100 million mobile-phone users who buy new phones every two years on average. Japanese consumers are also already used to shelling out hundreds of dollars for expensive phones with advanced capabilities such as digital television, camera and music," according to the paper.

You'd think we were in the midst of an economic downturn. Default rates on mortgages are soaring, and there is talk of a major bailout of people who are having trouble keeping up with their mortgages.

So how then, I ask, is it that people can apparently still afford to blow money on new televisions, video games, and all kinds of other consumer electronics knickknacks?

According to Sony (NYSE: SNE) CEO Howard Stringer, the shaky economy "has not affected electronics in the U.S ... Black Friday turned out to be very good for consumer electronics sales, and very good for PS3 (PlayStation 3) sales, PSP (PlayStation Portable) sales and beyond."

If people are struggling so much, why are they still spending so much money on PS3s and PSPs? Before we commit to a giant taxpayer funded bailout, shouldn't we look for signs that consumers are cutting corners themselves? Why are we bailing out people who are still spending on consumer electronics like drunken sailors on shore leave?

It's all very confusing. But for now it looks like, mortgages be damned, people still want to buy video games.

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.

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.

If you still hope to put a Nintendo (OTC: NTDOY) Wii under the tree this year, you best stop reading right now and run out to the mall. Supplies of the breakout gaming console are reportedly slim already, and should virtually disappear on Black Friday.

Bad news for you procrastinating shoppers, but good news for Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT). Though sales of Microsoft's Xbox have spiked in recent months -- directly attributed to the debut of the Xbox-exclusive Halo 3 game -- sales of Sony's PlayStation 3 were outpaced by Wii last month by more than four-to-one. Expect that to change through year's end as overflow demand for the scant remaining Wiis rings up sales of the PlayStation 3 and Xbox 360 consoles, with parents refusing to retreat home empty-handed.

Of course, the real winners in this are the early bird eBay (NASDAQ: EBAY) merchants, salivating at the prime seller's bonanza about to unfold. eBay currently lists several lots of multiple Wiis -- perhaps you can get your Grinch on, buy a bunch of 'em up and flip them through the shopping season. I'm just saying.

Then again, you could always get your kid tennis lessons, maybe a Louisville Slugger. No kid's going pro in Wii-sports anytime soon.

Shares of Microsoft were up 2% in early afternoon trading Tuesday, while Sony shares sat 1.37% higher.

This post is part of our Hottest Products of 2007 feature. Also check out our other Hottest Products of 2007 posts and let us know which product you think is the greatest thing since sliced bread.

Nintendo (OTC: NTDOY)'s Wii gaming console was a non-contender -- an underdog -- this time last year. The gaming console with the funny name was set to launch with little fanfare compared to the Sony Corp. (NYSE: SNE) PlayStation 3 or Microsoft (NASDAQ: MSFT)'s Xbox 360, launched a year earlier, but the Wii caught eyes because it was priced at only $250, compared to $600 for the PlayStation 3 and $400 for the Xbox 360. But then again, it had inferior graphics and other downgrades. My, my -- how customers didn't care about its competitors' touted features and other fluff.

Why not, you ask? The Nintendo Wii featured the most innovative and immersive gameplay, regardless of the hi-def video or audio output and inferior graphics. Nintendo figured out that consumers wanted a newer kind of gameplay -- not photo-realistic blood and guts. As an aside, they designed the initial games and many others to get game players off those duffs and onto their feet, wildly slinging those Wii-motes through the air -- swatting tennis balls, slaying dragons and driving cars. The mass, mainstream consumer loved it, and so the age of Wii was born.

Companies like Sony (NYSE:SNE) thrive on the loyalty of customers like Maryland teen Cory Troiano, who would kill to get his hands on a PlayStation gaming system. Unfortunately, this turned out to be literally true, in Cory's case. He is on trial for attempting to hire a hit man to whack his parents, after they yanked his PlayStation and TV privileges in an attempt to inspire him to behave better and improve his grades.

Even sadder is the report that his mother was reduced to taking part in a sting operation with a local policeman posing as an assassin. Cory reportedly offered the cop his stepfather's new pickup as payment for the crime.

What makes this more puzzling is that the kid was defending a PlayStation, for crying out loud. He can't even play Halo 3 on it, as he could on Microsoft's (NASDAQ:MSFT) XBox 360, or racket sports, as with a Nintendo (OTC:NTDOY) Wii. Perhaps third-rate devices attract third-rate kids.

Regardless, he's no doubt in for the grounding of a lifetime.