Sony likely to continue as a hardware company

Implications: Would you give up a residual revenue stream willingly?

Sony has more to lose than gain if they were to become a software only company.

Analysis: More often than not I disagree with Michael Pachter's opinions, but this is one time that I completely agree with him.  My comments regarding Mr. Yuta Sakurai's opinions won't be as harsh as Mr. Pachter's but I certainly agree that he has rushed to judgement and it is way too early to make such a bold prediction.

Sony not only will benefit from their self published software when the cost of goods for the PS3 comes down, but they make a royalty off of every game sold by every publisher for the PS3. 

It would make very little sense for them to abandon all of this future income to focus only on software.  They also have a lucrative accessory business as well. 

Furthermore, once the cost of goods drops they become profitable selling hardware as well as the software and accessories, as has been the case with the PS2 and the PS1 before it.

The PS3 is an excellent platform that will mature but was released about 6 months too early.  Because of this Sony is facing many challenges that are being magnified. 

Similar predictions/suggestions were made about Nintendo about 2 years ago, that they should become a software only company.  At that time the comment from Nintendo's president was that the day that Nintendo exited the hardware business would be the day they exited the video game business.  This seemed to be a bold statement at the time, but makes perfect sense today.

After the successful launch of the DS and the Wii, I am not hearing any such predictions or suggestions from anyone.  Clearly they have silenced their critics who felt they no longer belonged in the hardware business.

There is no doubt that Sony has issues today and that the launch of the PS3 has gone less than smoothly.  They are facing the toughest competition in the 11 years since they entered the video game business but they are a formidable company, and I believe they will fix the issues that they are currently facing in time.

With time we tend to forget the past, but while the Xbox 360 is doing very well today, Microsoft also had problems with their launch.

Sony has much more to gain by remaining in the hardware business and I see no indications that they intend to exit the hardware business.

We are just at the very beginning of a long 3 horse race, with three very powerful and competent competitors, it is clearly too early to be counting any of the 3 out of the race yet.

I firmly believe that in time the critics will also come to the conclusion that Sony very much belongs in the hardware business as well.