Sony's brave Sir Howard

newsmaker Sony has been in the news a lot in the last year, but mostly for the wrong reasons.

The electronics giant had to recall millions of notebook batteries. The hotly anticipated PlayStation 3 came out, but in lower volumes initially than expected. The fight over Blu-ray and HD DVD crimped sales of future high-definition players. Sony has picked up momentum in flat-panel TV sales, but the whole industry is experiencing fierce price competition.

Clearly, Howard Stringer, CEO of Sony and a Knight Bachelor in the British honors system, has his hands full. The former CBS newsman, however, was as ebullient as ever when he sat down with CNET News.com's Michael Kanellos and other reporters at the Consumer Electronics Show in Las Vegas earlier this month. Stringer, along with CFO Rob Wiesenthal and Sony Electronics President Stan Glasgow, discussed this year's product lineup for Sony, future products such as OLED televisions, the PlayStation 3 and an upcoming plan to right Sony.

Q: What are the current status and the goals for the electronics group?
Stringer: We set out a year and half ago (in June 2005) when I became the CEO to recover the electronics business to profitability. You will remember that for the first time the electronics side of Sony was unprofitable. Well, in the space of this time we are now at 4 percent margin on electronics, and that's significant. The cost of the PlayStation has raised some challenges on the consolidated numbers that we have promised, but we have to find a way to reach those targets as well. And that's what we'll be working on over the next few months, deciding how to get to the 5 percent consolidated number.

You all know about the (PlayStation) delays because you all covered that thoughtfully and elegantly and unkindly--but we've now reached a million PlayStations shipped to the United States, as ultimately promised.

And we're now very comfortable with our research program for PlayStation 3, which one researcher recently described as the Mercedes of games players, for obvious reasons. The million is more than we delivered of PlayStation 2 so, for all the anxiety, I think PlayStation 3 is well on the way to living up to that promise. That's a good sign.

What are the goals for this year for PlayStation?
Stringer: I think it's 6 million units by the end of the quarter, worldwide. And then we have got the European launch in spring, which is very important to us. (Editors' note: Stringer intitally said it would launch in April, but Sony later clarified it would occur in the spring.) I think we have 20 games out there. I assume we're going to increase the number of games.

Lost in the shuffle is the fact that the current games that are out there are only using about 20 percent to 25 percent of the bandwidth. Once the publishers' excitement reaches a level of intensity that they start using more of the bandwidth, that will create additional excitement.

Secondly, there now are 1 million Blu-ray players in the market, and each of those in the United States has a Blu-ray disc because we put Talladega Nights inside. I'd say 90 percent of the people who (own) PS3s are playing that Blu-ray disc on it or playing other Blu-ray discs on it. Contrary to some of the reports, it is an effective Blu-ray player. The people who like Blu-ray are the people who play PlayStation 3, just as people who play PS2s were the early proponents of the DVD format. It drove the DVD format.

I did read all the HD DVD excitement, but I think they sold 60,000 players, and we actually put out a million Blu-ray players. (Editors' note: Stringer initially said 60,000 HD DVD discs, but Sony clarified that he meant players.) So Blu-ray format is a strong format. You have to have a high-definition television; you have to have an HDMI link-up. But if you've seen the Blu-ray disc on the PlayStation, on the television set attached to PlayStation 3, it's a remarkable image.

Do you think the PlayStation 3 might become a vehicle for other applications or other forms of entertainment?
Stringer: Absolutely. Despite understandable concern about the cost--the whole purpose of PlayStation 3 is to create future opportunities. The early anxiety is that the Cell chip is expensive for consumer electronics applications. But prices come down, and for the first time in the last few months the Cell chip group is beginning to come up with Cell applications that are quite exciting. And I don't mean just the Stanford supercomputer (type of application), but beyond that. We're clearly at the stage where the opportunities for that high-powered processor are gathering momentum.

Somebody said to me before Christmas, "Well, yes, but this is very risky." Well, on the one hand you tell us we're not innovative enough, and on the other hand you tell us if we are innovative, it's too risky. It's a wonderful balance, and it is true. In the short term it's risky. But between the excitement of its potential and the availability of bandwidth that you have unused for interactivity as well as movies and 3D, it's worth the price of admission.