Bank on Sony's Blu-ray technology and PS3

Sony Corporation (ADR)  (Public, NYSE:SNE) is the 300 pound gorilla standing in the corner everyone is walking by.  The Walkman and PS2 days are over but Sony has a new ace up it's sleeve, and it's Blue. How quickly we forget that Sony just won the high-definition video format war with their Blu-Ray technology, which is built into the PS3.  Color me blue, because Blu-Ray is going to put Sony back on the map.

Sony shares are less than 10 cents away from their 52-week low, so what gives?

The U.S. economy is what gives, but that's not a realistic approach to a company that is going to take Blue Ray in 2008 and 2009 all the way to the bank.  It's been a rough ride for Sony and the last 3 months show in the stock price:

American investors have been sleeping on SNE shares, according to Pali Research’s Richard Greenfield, Blu-ray sales are expected to triple in 2008. 

He stated that in 2008, Blu-ray player sales as well as disc sales are going to absolutely skyrocket. DVDs though, he stated, are not going to see any decline. It seems that the belief is that there is just going to be greater consumer interest overall in both formats.

Blu-ray player prices are expected to drop, but not for another six months, as Sony tries to get the price down to a more mass market level. By Christmas though, he is predicting that the prices will see a dramatic drop.

The PS3 is the cheapest bet for Blu-ray followers and once they finally get some good game titles released, it's game on. 

This is the calm before the storm for Sony (SNE) and they don't have to worry about the XBOX360 taking their Blu-Ray sales. Aaron Greenberg, group product manager for Xbox 360, poured cold water on recent speculation that Microsoft could support Blu-ray after Toshiba Corp, backer of the rival HD DVD format, gave up when key movie studios and retailers abandoned the technology.

"Xbox is not currently in talks with Sony or the Blu-ray Association to integrate Blu-ray into the Xbox experience," Greenberg told Reuters in an said.

The Wall Street Journal put out a great article about Sony on Monday (3/10) and their struggle to re-gain market share, here's the link - Sony Shares Look Like a Bargain,
Analysts Say, but Hurdles Abound.

The best part of the article cites the analysts' impressive target prices on SNE shares:

Nevertheless, analysts say Sony's shares are cheap. Even after taking economic risks into consideration, Morgan Stanley's Mr. Ono says Sony's shares are worth about 6,600 yen ($64.47 USD), or about 43% higher than Friday's close. Macquarie Research analyst David Gibson is even more positive. He has a 12-month price target of 8,000 yen ($78.14 USD)  on Sony.

Analysts say that Sony has made significant progress in restructuring over the past three years. The company has slashed costs by nearly $2 billion by cutting jobs, closing factories and reducing the number of product models it sells by 20%. Late last year, Sony's semiconductor unit sold to Toshiba Corp. facilities that make the processor and graphic chips used in its PlayStation 3 videogame console for 90 billion yen. Sony decided to sell instead of making the big investments needed to continue making the integrated circuits.

Sony is doing what's best for shareholders and the life of the company.  That's the kind of game plan I look for to make a decent investment these days (take a lesson Blackstone Group (BX) - Does the Blackstone Group care about its shareholders?)

Happy Safe Trading fellow Masters, Sony's Blu-Ray is money in the bank.

Disclaimer: The Author has a long position in SNE.