Sony's PlayStation unit shakes up top management

Ken Kutaragi will leave his position as president of Sony Computer Entertainment Inc. (SCEI), the unit responsible for the PlayStation family of games consoles, and hand day-to-day control of the company to Kaz Hirai, previously head of SCEI’s U.S. unit, the company said Thursday.

The surprise shake-up will see Kutaragi become chairman and group chief executive officer while Hirai takes on the posts of president and group chief operating officer. The change will take effect on Friday. It comes less than three weeks after the company launched its PlayStation 3 console in Japan and the U.S. — a launch that has been hit by a string of problems.

The console was originally due to go on sale in early 2006 but was delayed until November because the copy protection standard for the console’s Blu-ray Disc drive wasn’t ready. As the November launch came closer, Sony was forced to again revise its plans because of a component shortage. That meant the European launch was pushed back until March 2007 and retailers in Japan and the U.S. would get fewer consoles than anticipated.

SCEI was also pushed to reduce the price of the console in Japan prior to its launch. After announcing that the cheaper of two models would cost ¥62,790 (US$541) the product was widely criticized for being too expensive and SCEI cut the price to ¥49,980 ($430).

The company also faces problems in its handheld business. The PlayStation Portable (PSP) was launched with much fanfare in 2005 but business hasn’t gone as expected. In the last full fiscal year the company sold around 13 million devices. Typically PlayStation sales rise for several years before falling, but SCEI forecast sales this year would be around 12 million units. But business has been much worse than expected, and the estimate now stands at 9 million.

As part of the shake-up Jack Tretton, executive vice president and co-chief operating officer of Sony Computer Entertainment America Inc. (SCEA), will replace Hirai as president. In Japan Akira Sato, a member of the company’s board of directors, will become vice chairman and David Reeves, president and COO of Sony Computer Entertainment Europe Inc., will take on the additional title of deputy president of SCEI.

“On the face of it, it’s more of a visible move for Hirai,” said Hiroshi Kamide, director of the research department at KBC Securities Japan. “He now takes on global responsibilities inside SCEI. It’s the same faces changing hats so for investors it’s not such a significant event.”

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