Sony Corp. said on Wednesday it would delay the European launch of its PlayStation 3 (PS3) game machine to March from November due to inadequate supply of a key component, missing the critical Christmas shopping season in one of its main markets.

This is the second time Sony, which competes with Microsoft Corp. and Nintendo Co. Ltd. in the nearly $30 billion (16 billion pounds) video game market, has delayed the sale of its latest blockbuster PlayStation console.

The company earlier this year delayed overall PS3 launch to November from spring 2006.

The announcement, made after the Tokyo stock market closed, comes after recalls of almost 6 million notebook PC batteries Sony provided to Dell Inc. and Apple Computer Inc., raising concerns over its core manufacturing strength.

I feel sorry. I think there are so many people out there who hold such high expectations for PS3, said Ken Kutaragi, the head of Sony's game unit and known as the father of the PlayStation

The delay means that the PS3 falls substantially behind its rival machines Microsoft's Xbox 360 and Nintendo's Wii in time to market in parts of the world. Microsoft launched its Xbox 360 late last year and Nintendo plans to offer the Wii in the final quarter of 2006.

Kutaragi said commercial production of blue laser, a key component for PS3's Blu-ray optical disc drive, has fallen behind the original schedule, forcing the delay.

Sony has kept unchanged its Japan launch on November 11 and North American launch on November 17. It has also stuck to its target to ship 6 million units of PS3 worldwide by the end of March despite the delay in Europe.

Flagging potential problems with the PS3 roll out, Mitsubishi UFJ Securities last month cut by half its shipment forecast to 3 million of the new PlayStations in the current business year to March, citing difficulties in procuring its cutting edge parts.

FAR-REACHING IMPACT

After the announcement of the launch delay in Europe, Daiwa Institute of Research analyst Kazuharu Miura joined a group of industry watchers who take a bearish view on PS3 shipments.

We had forecast PS3 shipments of 5 million, instead of Sony's 6 million forecast. I think 4 million is a more realistic picture now, Miura said.

He added that it is hard to tell how the delay would affect the game division's earnings for the current business year to March 2007.

Sony said in April it expected its game division to rack up an operating loss of 100 billion yen this business year due to heavy start-up costs for the PS3.

Sony is expected to make a loss on each console it sells at the initial stage, making the assessment of a financial impact from the delay difficult.

The success or failure of the PS3 will have a far reaching impact on Sony's mid term group earnings.

At stake is more than just pole position in the nearly $30 billion video game industry, but also dominance in next generation DVDs and the commercial viability of the cell microchip co developed by Toshiba Corp. and International Business Machines Corp.

The PlayStation 3 comes with a Blu-ray high definition optical disc player and is powered by the Cell microchip, dubbed a supercomputer on a chip.

The electronics and entertainment conglomerate holds high hopes that the PS3 will help Blu ray technology conquer a rival format called HD DVD in becoming the standard for the next generation DVD. HD DVD is backed by a group of companies lead by Toshiba.

The game console is the widely awaited successor to the PlayStation 2, of which more than 100 million units have been sold since its launch in 2000.

(Additional reporting by Nathan Layne, Aiko Wakao, Mayumi Negishi)

Japan Electronics Sony