Ken Kutaragi Retires

http://www.reuters.com/article/technologyNews/idUST14243620070427

Sony's "Father of PlayStation" to step down
Fri Apr 27, 2007 3:55AM EDT
By Lisa Baertlein and Kiyoshi Takenaka

LOS ANGELES/TOKYO (Reuters) - The architect of Sony Corp.'s (6758.T: Quote, Profile, Research (SNE.N: Quote, Profile, Research PlayStation, Ken Kutaragi, will step down on June 19, at a time when the Japanese company is fighting to reassert its lead in the video game market.

Known as the "Father of PlayStation," Kutaragi, 56, took a lead role in the invention of the Sony game console in 1994 and the PlayStation 2 in 2000. Known as a company black sheep, he bucked consensus to turn video games into a cash cow, but lately has seen his status diminish.

Sony has sold more than 200 million units of these consoles globally, though the PlayStation 3 has made a weaker-than-expected showing against Microsoft Corp.'s (MSFT.O: Quote, Profile, Research Xbox 360 and Nintendo Co. Ltd.'s (7974.OS: Quote, Profile, Research Wii console since its launch last year in the $30 billion video game market.

Nintendo, which entered the three-way console race in the underdog position, on Thursday stunned investors with a nearly eight-fold rise in quarterly operating profit and forecast stronger than expected growth for the year.

Kutaragi will retire as chief executive of Sony Computer Entertainment Inc., known as SCE, and become honorary chairman. He will also act as a senior technology adviser to parent Sony Corp., the company said on Thursday.

Kazuo Hirai, the division's current president and chief operating officer, has been promoted to group chief executive in charge of the PlayStation business.

Analysts said Hirai has big shoes to fill.

"Mr. Kutaragi is a legend in the gaming industry. He beat entrenched competitors who had been in the business for years, like Nintendo and Sega," said Jupiter Research analyst Michael Gartenberg. "He dominated two generations of console cycles, which was unheard of in the industry."

"It's Mr. Hirai now who is going to be on the hot seat and who is going to have to deliver PS3 success," Gartenberg said.

Sony's American depositary shares fell 1.68 percent to

$54.29.

END OF AN ERA

Kutaragi's exit is seen as the end of an era for Sony, the once high-flying electronics and entertainment conglomerate that has already lost the lead in other key products such as portable music players.

Kutaragi was widely viewed as a company renegade who frequently spoke out against Sony's decisions. The PlayStation was born from his anger at Sony being forced out of a video game console partnership with Nintendo.

Formerly an executive at Sony Corp., Kutaragi was passed over to lead the company when Howard Stringer was appointed CEO in 2005 and the two have had a rocky relationship.

Kutaragi gave up operational control of the game division in December, when Hirai, who had led the U.S. PlayStation business, moved to Japan.

Kutaragi said in a statement that he had been considering his decision for some time. SCE said his departure had nothing to do with the slow debut of the PS3.

"Since the early days of the business, his contribution over more than 10 years is beyond any word. No one can compare that with our business over the past few months," SCE spokesman Satoshi Fukuoka said.

The PS3, which came into the current console war as the incumbent leader, is loaded with high-end features like a high-definition DVD player and cutting edge graphics. But its hefty $600 price tag left many would-be buyers on the sidelines waiting for a price reduction or an absolute must-have game.

While the game business has traditionally been a key revenue driver for Sony, the PS3 has thus far has weighed heavily on results.

Due mainly to hefty PS3 start-up costs, the game division is estimated to book a loss of more than $1.7 billion for the year ended March 31.

In a statement, Kutaragi said he plans to pursue work beyond PlayStation: "I'm looking forward to building on this vision in my next endeavors."

SCE spokesman Fukuoka said Kutaragi will likely be tackling new challenges in fields that are related to the PS3 or the Cell microchip, which drives that new game console and is dubbed "supercomputer on a chip."

(Additional reporting by Franklin Paul and Kenneth Li in New York)