Sony's PS4 Neo Launch Plans Fail To Impress, Stock Down

It took Sony Corporation (NYSE:SNE) a little less than three years to come up with the superior twin of its star product -- PlayStation 4 (“PS4”) video game console -- putting speculations to rest.

This news failed to cheer investors as the stock slid almost 2.6% on the regular trading session on Friday.

Neo Sees the Light of Day

About three months from now, sources revealed that Sony is planning to revamp PS4 to support 4K gaming. Named Neo, this latest offering from Sony’s video game console is a sophisticated update to PS4. PS4 Neo is integrated with hardware specifications that offer superior quality graphics and 4K resolution.

Sony has managed to pique the interest of gamers with the unveiling of Neo, however, the time of launch hasn't been specified. The Japanese company has however extinguished the possibilities of showcasing the PS4.5 or Neo at the Electronic Entertainment Expo (“E3”), a prominent trade show for computer, video and mobile games to be held from Jun 14--16 in Los Angles. Meanwhile, industry insiders opine that Christmas may come early for members of the gaming cosmos as the Neo release is expected in the first half of fiscal 2016, anytime between June and October.

How is Neo Better?

Coming to the most pressing question: What’s the difference between PS4 and PS4.5/Neo? It is believed that PS4.5 will have better clock speed and improved GPU compared with PS4. Also, PS4 has 18 “compute units” running at 800MHz clock speed while PS4 Neo is expected to be powered with almost double compute units running at 911MHz. Also, reports from Giant Bomb suggest that PS4 Neo will run on an improved octa-core processor at 2.1GHz and will have a faster RAM than PS4.

The additional features will however cost more than $350, which is the current selling price of PS4. Sony affirms that PS4 Neo will provide enhanced resolution and offer greater frame rates but this should not upset the existing 40 million users of PS4. This is because all games will be engineered in a way that supports both the consoles, making sure that the existing PS4 owners will not have to bear any additional cost.

This implies that all games will be designed in an “enhanced mode” for PS4 Neo which will offer users an impression that they have ventured into a far more realistic simulated 3D world compared to the standard PS4. In a nutshell, both the products will co-exist in harmony, catering to different consumer groups. Also, Sony informed that both the current and refurbished versions of PS4 will support the company’s PlayStation VR headset that will be launched in October.

Gaming Universe to Ramp Up

Sony has emerged as the undisputed leader in the gaming universe, garnering stellar PS4 sales since its launch in 2013, staving off competition from peers like Microsoft Corporation (NASDAQ:MSFT) and Nintendo Co. Ltd. (OTC:NTDOY) . However, Sony must up its ante as 2017 is expected to be a big year for video game makers as both Nintendo and Microsoft are expected to come up with brand new consoles.

Presently, Microsoft is hinting at the launch of innovative offerings ranging from lower cost versions of Xbox One to streaming micro-consoles at E3. Meanwhile, Sony’s strategy to upgrade its existing console at competitive rates may help it combat the intensifying competition. As major technology biggies lock horns, consumers are expected to be the real gainers in terms of state-of-the-art gaming experience.

Alls Not Well

Despite PS4 raking in considerable profits, Sony has been recently facing pressure owing to weaknesses in number of its businesses, namely, mobile and sensor which are expected to impact its financials in the near term. Factors like intense rivalry in each of its product lines including television, game platform, smartphone and services, along with weakness in the cameras business and no immediate rebound in the image sensor segment add to the company’s challenges. Also, the Kumamoto earthquakes have significantly aggravated problems for this beleaguered company by hitting its Devices segment and IPS segments heavily.

Owing to these adverse factors, Sony currently has a Zacks Rank #5 (Strong Sell). A better-ranked stock in the industry is Dolby Laboratories, Inc. (NYSE:DLB) with a Zacks Rank #1 (Strong Buy).