Will Sony’s New PC Add Muscle?

To compete with large vendors in the rising netbook PC market, Sony (SNE - Snapshot Report) plans to launch its new VAIO W series laptop, currently meant for the Japanese market. The new netbook is expected to hit stores in August with a selling price of around ¥60,000 ($629), according to some sources.

Sony has declined to comment on the product and has not provided any specific pricing details or expected sales for the new netbook model. It expects to increase VAIO PC sales from 5.8 million units in fiscal 2008 to 6.2 million units in fiscal 2010.

The new Sony netbook is built on Microsoft’s (MSFT - Analyst Report) Windows XP operating system and based on Intel’s (INTC - Analyst Report) Atom processor. In comparison to 1,024-by-600-pixel displays that are used in other netbooks, the new VAIO series features an LCD display with a resolution of 1,366-by-768 pixels. It also consists of 1GB of RAM memory and a Wi-Fi module.

Netbook PCs help keep users connected while traveling. The new VAIO PC provides portability, convenience, and is much more affordable than a traditional notebook or desktop PC.

However, in comparison to Sony’s previous VAIO P series netbook model – an ultra-slim netbook launched in early 2009, the new W series netbook is bulky and less trendy. The new model also features the same netbook configuration as its earlier model, meaning that there is nothing new which could attract users.

Although Sony expects the new design and high-resolution display to make it easier for the company to penetrate the netbook segment and gain a presence in the market, we see no good distinguishing feature in the model that could help it compete with other existing players. With no unique qualities, it is less likely that the new model will be well accepted.

Sony faces tough competition from other large players in the netbook market with much larger market share. The netbook market is crowded by large players trying to diversify their offerings of netbooks, such as Asustek (AKCPF), Acer Inc. (ACEIF), Hewlett-Packard (HPQ - Analyst Report) and Dell (DELL - Analyst Report), who have established their own brand name.

Acer plans to launch new, low-cost portable PCs that run on Google Inc.'s (GOOG - Analyst Report) Android operating software in the third quarter of 2009. The new VAIO PC is expected to be priced at more than $600 while Asus’s Eee Seashell netbook and HP’s new aluminium and magnesium-clad Mini netbook are available at $430 and $450, respectively.

In our view, to make the netbook successful, Sony must price lower than its competitors. Dell also plans to push into the netbook manufacturing market. Sony also competes with Apple (AAPL - Analyst Report), which holds a strong position in the netbook market with the MAC OS X netbook and plans to enter the market with sub $500 netbooks.

In addition, NVIDIA (NVDA - Analyst Report) will develop an integrated x86-based chip for use in low-cost computers as well as in netbooks and mobile Internet devices. ARM will also enter the netbook market with the launch of netbooks based on Cortex-A8-based system-on-chips like the Texas Instruments (TXN - Analyst Report). Also, Sony faces intense competition from Microsoft’s Windows XP netbooks and the latest Windows 7.

Excluding inter-segment sales, revenue in Sony’s Electronics division decreased 31.6% over the year-ago period, driven by decreased sales of VAIO PCs. Given the growing competition and pricing pressure from its competitors the future of the Vaio W series does not look bright. We maintain our Sell rating on SNE.

 

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