Friday, September 30, 2005

Piper Jaffray Joins the Fray

Here's an excerpt from Piper Jaffray analysts Anthony Gikas and Stephanie Wissink about projected next-generation hardware sales
Starting with the home hardware, Gikas and Wissink released their sales projections for each system over the next three years. Through 2008, Gikas and Wissink expect Microsoft to sell 19.6 million Xbox 360 units, with the PlayStation 3 and Revolution trailing at 15.5 million and 5 million units, respectively. The estimates for both Sony and Nintendo's consoles are based on late 2006 releases for the systems. But while the PS3 is expected to accelerate quickly and lead all systems with 8.5 million units sold in 2008, the ambitious Revolution is listed as starting slow (500,000 units sold in 2006), and lagging behind its competition with 2 million and 3 million systems moved in 2007 and 2008, respectively.

Gikas and Wissink forecast a modest net increase in console sales, partly due to market cannibalization as the handheld sector catches fire.

I'm not mentioning these numbers because I think they'll be anywhere near accurate. There are so many assumptions and extrapolations that have to be made to create a projection that even a small margin of error on each one can blow the numbers totally out of the water.

There are two things worth noting here, though. First, I think the buzz on the PS3 is turning sour. No analyst six months ago would have given Microsoft any chance of having the largest installed base at the end of 2008, not to mention a lead of twenty percent.

Do I think that's right? No. But I think it's representative of what the investment community is hearing about Sony being behind on the hardware and developers not being pleased with the development environment. And I'm surprised about the developers. I thought Sony would do a much better job of supporting them in the new generation than they did with the PS2.

The second thing worth noting is their line about console sales only "modestly" increasing because handhelds would "catch fire." That's an interesting perspective. What I think calls that into question, though, is how many people buy a handheld instead of a console? I see those as complementary purchases, not mutually exclusive.

Oh, and their estimate of the Revolution only moving half a million units in its launch year is relatively insane. Nintendo could introduce a #2 pencil as their next console, and if they wrote "NINTENDO" on it and trotted out Miyamota to wave at the press conference they'd move more units than that.

Site Meter