Sony is believed to be developing the PlayStation 4, based on comments at the company's earnings call.  (Source: AP Photo)

Sony has received permission to turn on the PlayStation Network in Japan.  (Source: Sony)
Company is trying not to let security issues bring it down

Sony Corp. (6758) was left struggling in the wake of falling victim to arguably one of the largest theft of customer data in world history.  The company first experienced a near complete loss of information from its two largest customer databases -- the PlayStation Network (PSN) database and the Sony Online Entertainment (SOE) database.  This week, five of its international sites for its various units fell prey to SQL injection attacks (affectionately nicknamed the "Little Bobby Tables" attack) [1] [2] [3].

I. PSN Asia Returns

After restarting PSN in the U.S. Tuesday and rolling out identity theft protection, as promised, to U.S. customers, Sony is now preparing to take another significant step in its recovery effort, restarting the PSN in Japan, Taiwan, Singapore, Malaysia, Indonesia and Thailand.  The services will turn back on sometime this Saturday.

The restart in Japan is especially significant symbolically, as Sony was embarrassed when its home nation's government refused to allow its primary console gaming service to restart.  The company apparently did enough to placate government regulators, who were concerned that Sony wasn't doing enough to protect customer privacy.

Makiko Noda, a Tokyo-based spokeswoman said her company has turned to "more advanced" security technologies including network activity and vulnerability monitoring software.  She says the company plans to fully restore its downed networks by the end of May.

Sony is confident it will pay only $2 USD per lost record from its various web properties.  That's less than 1 percent of the average payout of $318 USD per lost record (including class action lawsuit settlements) that was the average in 2010.  And in recent years the cost of data lost has tended to increase by a factor of 1.5 each year.  Clearly Sony is hoping for some sort of miracle to save it financially from loss of business internationally and class action lawsuits from disgruntled former customers.

II. PS4 Development Starts

Perhaps hoping to redirect public conversation in a more positive direction, Sony CFO Masaru Kato dropped a hint in his company's earnings call that a successor to the PlayStation 3 is in the works.

He comments:

For the home equipment the PS3 still has a product life, but this is a platform business, so for the future platform – when we’ll be introducing what product I cannot discuss that – but our development work is already under way, so the costs are incurred there.

Sony emphasized in filings that the development costs and financial losses for the tsunami overshadowed losses from the data breaches -- although the possibility remains strong that Sony is seriously underestimating those costs.

Analysts believed that the successor -- broadly referred to as the "PlayStation 4" -- wouldn't come out for a couple years.  But with Nintendo Comp., Ltd. (7974) reportedly preparing to announce the successor to its best-selling Wii console, code-named "Project Cafe", at E3 next month, Sony may find itself forced to bump up its production schedules.

Sony currently sits solidly in third place in the console race, behind market leader Nintendo and second place Microsoft Corp. (MSFT), makers of the Xbox 360.

Lost amid the recent hacking chaos has been an equal serious slowing in sales of Sony's PlayStation 3 console and PlayStation Portable handheld.  While sales totals for these consoles' lifetimes are no flop (no Sega Saturn or Sega Dreamcast, that is), the slow in recent months have been troublesome.

It took Sony eight months to sell 8 million units of its motion-sensing accessory PlayStation Move.  By contrast, Microsoft reached this mark in only two months with the Kinect.

Little is known about the next generation PlayStation.  But it will likely incorporate motion-sensing technology deeply.  And hopefully its networks will be better secured.

"This week I got an iPhone. This weekend I got four chargers so I can keep it charged everywhere I go and a land line so I can actually make phone calls." -- Facebook CEO Mark Zuckerberg

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