Sony Corporation (NYSE: SNE) told the world yesterday that it would see a profit drop for its fiscal 2008 period of roughly 59% from the previous fiscal year, revising its summer forecast of just a 38% drop. But here's the kicker: it also revised another summer 2008 figure, stating that earnings in fiscal 2008 would be in the arena of $1.5 billion from the summer forecast of $2.45 billion. That's almost an entire billion in revisions since just this summer.

That, my friends, is indicative of a severely pinched consumer electronics marketplace, and it doesn't bode well for this holiday's retail shopping season whatsoever. Sony pointed its finger at flat-panel televisions (no surprise) and categories like digital cameras and video cameras as having a large impact on 2008 earnings. Not only is the competition taking sales away based on lower prices (think Vizio and other brands), but consumers are conserving that precious cash as well. Sony's premium branding and pricing placement just isn't going to continue resonating in this kind of economic environment.

If the Consumer Electronics Association really thinks that consumer electronics sales the rest of this year (and into 2009) won't be hurt by slimmer customer pocketbooks, they are sadly mistaken. You can't cover it up -- all industries are going to feel the wrath. In fact, they already are as proved by Sony's announcement here. Even South Korean consumer electronics giant LG Electronics saw a 93% profit drop in its latest quarter. Time to batten down the hatches, Sony. The hurt is just beginning.

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.

After preparing to see if Nintendo Ltd.'s (OTC: NTDOY) Wii Fit game would fly off the shelves once it was released yesterday in the U.S., there was no disappointment to be had. That is, the Wii Fit was sold out at 11 different stores in my area by noon on the day of release. You'd think this was holiday shopping time or something, yes?

The Wii Fit, which comes with a game disc and a unique exercise "board" with sensors and all kinds of feedback, is geared towards exercise routines more than playing games. But, the unit does both -- it's a game that's masquerading as an exercise game. Just like the Wii Sports game that ships for free with every Nintendo Wii gaming system sold, exercise is the key to Nintendo's strategy with the Wii, even though it sells standard fantasy games as well.

But, the sheer insanity of word-of-mouth marketing and media coverage showed itself yesterday, as I visited no less than 11 different retail stores, from Wal-Mart, Inc. (NYSE: WMT) to Best Buy, Inc. (NYSE: BBY) to Circuit City Stores, Inc. (NYSE: CC). There was not a Wii Fit to be found. In fact, two of the Target Corp. (NYSE: TGT) locations told me that all Wii Fit stock had sold within 10 minutes of the store's opening that morning. It seems Nintendo may continue to dominate the current gaming systems for quite a while.

Sony-Ericsson, the fourth-largest handset company, has announced it will open its own music store for consumers who buy its handsets. According to MarketWatch, the service "will be available in 30 countries worldwide by the end of 2008, starting from May. It will offer more than 5 million music tracks."

With Nokia (NYSE: NOK) and Apple (NYSE: AAPL) already in the same business, it is hard to see how the new Sony-Ericsson initiative will find customers. A number of cellular carriers have services of their own, which means that they compete with their own handset suppliers. Companies outside of the cellular business have also created music download stores for portable devices. The most notable new player in that market is Amazon (NASDAQ: AMZN).

The multitude of download services is not likely to make those getting in late much money. And having so many services in the market will confuse the consumer.

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

When Time Warner, Inc. (NYSE: TWX)'s Warner Bros. abruptly dropped support for the HD DVD high-definition disc format this past weekend to focus solely on format competitor Blu-ray, HD DVD primary backer Toshiba Corp. (OTC: TOSBF) began to get really nervous. After all, this ridiculous next-generation format war (like the VHS vs. Betamax wars of the 1980s) was keeping many customers from buying a newer, high-definition DVD player for fear of buying something that would soon become obsolete.

Sony Corp. (NYSE: SNE), on the other hand, was probably cheering in all its executive offices. Sony, who has more Blu-ray-capable DVD players sold than any other company in the form of PlayStation 3 game consoles, has been Toshiba's mortal enemy in the race to win the single-format, high-definition DVD war that started raging in 2007.

Investors liked the Warner Bros. announcement also, and Sony saw its shares edging higher this morning (up almost 3%). With Time Warner on board, 70% of all major films will now see DVD releases on the Blu-ray format. Some have even gone so far to say that HD DVD is now dead, even as it just started growing. Consumers will win with one standard, but some companies -- like Toshiba and Microsoft Corp. (NASDAQ: MSFT) -- will stand to lose at least a piece of their collective shirts. That's a format war for you.

Sony Corporation (NYSE: SNE) is calling it quits with its ImageStation online photo finishing service, and is in the process of shuttling customers to Shutterfly's market-leading photo finishing service. Sony has said that ImageStation will cease operations in mid-November. No surprise, really, since nobody I've talked to even knows Sony's offering ever existed.

This is another case of an electronics market leader trying to offer a complementary service to one of its product lines (like Sony digital cameras), and that effort failing miserably. In Sony's case, it marketed ImageStation with its consumer digital cameras, when it should have partnered with Shutterfly in the first place. Market leaders are generally the best way to link your brand with a service that is synonymous with online photo printing, but in classic Sony close-minded fashion (think MiniDisc and Memory Stick), it wanted to keep customers within "Sony" services. Meh.

The company says that it is closing its ImageStation service to "focus on the company's core businesses, products and services," although that's probably just a way of saying that the lack of customers did not justify the continued operation of the service. Shutterfly beat it, just like the way Apple, Inc. (NASDAQ: AAPL)'s iTunes music store bested Sony's "Connect" online music store, which the company decided to close after three years of trying to compete with Apple and others like Napster and Yahoo! Inc. (NASDAQ: YHOO) music.

Sony Corp.'s (NYSE: SNE) PlayStation 3 has rung up over 3 million gaming console sales since its introduction last November, but those numbers pale in comparison to the 8+ million Microsoft's (NASDAQ: MSFT) xBox 360 and 9+ million Nintendo, Ltd.'s (OTC: NTDOY) Wii consoles that have been sold. Microsoft is busy turning the xbox 360 into a central entertainment piece in the living room, with movie downloads and global gaming, and while Nintendo sits back with its smash, video-less Wii (for the casual, mass consumer), Sony has decided to try and pump up the PlayStation 3 with an introduction into the video download market.

Now, Sony must have known that the PlayStation 3 would have a hard time finding the sales numbers that many analysts expected, since the thing cost $600 upon debut and has barely fallen since. The PlayStation 3 is a supercomputer more than a gaming console (with a price to match), and Sony needs some ancillary services to get the interest level to a point where it can start selling more consoles. Sony's (important) gimmick: it does not plan to charge for its own video-based service that should be available soon from the Sony PlayStation Network video download service. Why? Well, Sony will be using the multitude of content from inside the company instead of going to outside vendors like Time Warner, NBC or any other media outlet.

Sony has a full catalog in-house, and it's willing to bet that by offering free access to those services, more customers will be inclined to buy a PlayStation 3 above the competitor's gaming consoles. Still $500 to have access to free Sony video entertainment? Although Sony execs admit these services won't come in 2007, they do say it's in the realm of the "platform life-cycle" of the PlayStation 3. So, Sony will launch these services on the downward slope of the PlayStation 3's life-cycle in the market? Very odd. Microsoft already has a solid offering here and is beating Sony all over the map with sales to its console. Will some late-entry video offering -- even free -- be enough to gain paying PlayStation 3 gaming console customers? Nope.

While digging around at Amazon.com(NASDAQ:AMZN) this week, it was interesting to find that the Sony (NYSE: SNE) PlayStation 3 moved up to the top of the list in terms of gaming console sales as of this past Tuesday -- one day after Sony dropped the price on the game console from $599 to $499. Did a $100 drop in price immediately result in Sony's PlayStation 3 pulling ahead of the Nintendo Wii, which has consistently beaten it in sales since both systems were launched in November of last year?

This is interesting, though I don't know the exact specifics on how Amazon.com calculates this type of ranking. By "most popular," does Amazon.com mean most sales? Most looked-at? What? Maybe I am missing something here. Regardless, if a $100 price drop from Sony on the PlayStation 3 can be correlated to almost-instant increased popularity (however that is defined), what is in store for the Nintendo(NASDAQ:NTDOY) Wii's sales? How about Microsoft Corp.'s (NASDAQ: MSFT) Xbox 360 sales?

It's hard to see how Sony is making any profit (read: losing its shirt) by selling technology that costs over $600 for now less than $500 (similar to Microsoft's profitless Xbox 360), but if it is betting on engaging consumers with a lower price, maybe future volume shipments will give it some breathing room as it tries to sell more consoles. Both Nintendo and Microsoft have a pretty substantial lead on unit shipments over Sony so far, and price cuts generally are reflective of a degree of desperation when they happen. In Sony's case, I think this is very true.

While the gaming world watches sales and availability of Sony's PlayStation 3 very closely, competitor Microsoft Corporation (NASDAQ:MSFT) is constantly trying to deflate the wind from Sony's sales by apparently crashing its launch parties around the world with its Xbox 360 game console along with vivid demonstrations of the large price gap between the two game consoles.

Sony is in the midst of launching the PlayStation 3 console in Europe, Australia and New Zealand -- but according to reports, the initial furor Sony saw in the U.S. last November upon the PlayStation 3 launch is not happening in other parts of the world. To top off soft initial sales at launch time in different global markets, Microsoft is adding insult to injury by having (directly or indirectly) jabs poked at Sony in some pretty memorable ways.

Take Paris, where a waterside PS3 launch venue saw a giant boat float by with "Xbox loves you" draped over the side. In Australia, the retailer Gameplanet had a nice Xbox 360 display surrounded by quite a few cases of beer to demonstrate the cost difference between the PlayStation 3 and the Xbox 360. Microsoft seems to have gotten pretty inventive with its competitive marketing here, which is odd considering Microsoft's operating system marketing is decently pathetic most of the time. But when it comes to marketing its gaming console, it's quite a different story.

[Disclosure: I own MSFT shares as of 3-26-07]