Analysts predict high manufacturing costs and sluggish sales of the PS3 could cause Sony on Wednesday to report its biggest quarterly loss in four years. The Japanese giant could see a fourth-quarter loss of as much as $630 million during the three months ended March 31 on sales of $16.8 billion, according to analysts surveyed by Bloomberg. Sony’s game division alone could post a quarterly loss of $1 billion and an annual deficit of $2 billion. Daniel Ernst of Soleil Securities Group says game division losses have been almost double that of initial estimates. However, HSBC analyst Carlos Dimas predicts that strength in pictures and electronics will offset game losses and help the company deliver annual profits of $681 million.

Sales figures put the PS3 behind Microsoft’s Xbox 360 and Nintendo’s Wii. A $250 price tag, motion-sensitive controller and unique games have helped the Wii soar off store shelves, while the $599 PS3 — initially hampered by manufacturing woes and limited availability — now sits on shelves with a high price tag and limited selection of games.

Later this week, research firm NPD group is expected to release monthly sales figures for the U.S. gaming industry. Analysts like Wedbush Morgan Securities’ Michael Pachter predict sales of 100,000 PS3s and 300,000 Wiis.

Figures released by NPD last month put Nintendo in first and third place, respectively, with its DS portable system and Wii. Sony’s aging PS2 took second place, with the PS3 coming in sixth. Lifetime U.S. sales of the PS3 and Wii are now at 1.2 million and 2.1 million, respectively.

The seven-year-old PS2 system — now $129 — has outsold the PS3 each month since the latter’s November 2006 debut. The PS3′s price tag remains too high a hurdle for many consumers to clear, and price cuts are one of the strongest incentives the company has to get consumers to buy. According to HSBC’s Mr. Dimas, Sony needs to cut the PS3’s price by at least 20 percent during the next year if it wants to increase PS3 uptake.

Source: Red Herring