When Sony launched its PSP Go last year the company had high hopes. The device was supposed to help PlayStation Portable shipments increase by almost a million units for the year and spearhead Sony's digital download push into the portable gaming market. But things haven't gone according to plan.

The PSP Go is both smaller and lighter than the original PSP and represents the first major refresh of the portable gaming platform since it was introduced in 2004. There are numerous cosmetic changes but the biggest difference is the absence of a slot for software discs. The PSP Go relies exclusively on Internet downloads for games and so it makes up an important part of Sony's strategy to move audio, video and game content sales online.

Gamers haven't been impressed. In the first week of March in Japan, the latest version of the original PSP sold 60,808 units, according to estimates from Media Create, while the PSP Go shifted just 1,275 units. Total sales of the PSP Go so far this year in Japan are 23,455 units versus average weekly sales of 70,342 units for the PSP, according to the data, which is derived from retailer sales systems.

"The hardware and software of PSP didn't sell as much as we expected," said Nobuyuki Oneda, Sony's chief financial officer, announcing the cut during Sony's quarterly earnings news conference in February. "That's an issue and it's on our mind."

Sony had hoped the PSP Go would help it recover from poor sales earlier in 2009 and put its portable gaming business back on track but that didn't happen. Instead of shipping 1 million more units during the fiscal year to March as it originally hoped, Sony has ended up slashing its sales forecast from 15 million units to 10 million units.

Oneda cited growing competition in the portable gaming market as one of the factors behind the worse-than-expected sales. Cell phones such as the iPhone are providing tougher competition in the battle for casual gamers, and rival Nintendo launched its DSi XL in Japan right before the PSP Go hit shelves.

But they weren't the only issues.

"There was a lot of confusion about the product in the first place," said Hiroshi Kamide, an analyst with KBC Securities. He cited a plan by Sony to allow owners of PSP software on discs a way to transfer it to the disc-less PSP Go. The plan was withdrawn shortly before launch, leaving many would-be buyers unable to play already-purchased content on the new hardware.

"It also doesn't look that great, it doesn't have the wow form-factor, and it's more expensive," said Kamide.

At US$245 the PSP Go is a hefty premium over the $170 existing PSP, and isn't much cheaper than the PlayStation 3 console, which costs $299.

"If I wanted the PSP Go to be successful, I would probably drop the price quite a bit," said Kamide. "The cost isn't much different from the PlayStation 3. That's extortionate for a handheld, it needs to be half that price if anything."

Sony isn't saying much on what it has planned for the PSP Go but Oneda dropped a couple of hints.

"The software and network contents need to be made more available so they'll be key," he said.

There was no word on a price cut but Sony doesn't have to look far to see what that might do.

Sony resisted calls to cut the price of the PlayStation 3 for several years but last year introduced a new model with a lower price tag. As a result sales of the console have been given a boost.

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