The PlayStation 3 has been off to a slow start. Month after month competing consoles (Wii and Xbox 360) outsell the new Sony console here and in Japan. Sony's game division is expected to lose about 200 billion yen ($1.7 billion) for the fiscal year just ended March 31. Did PlayStation mastermind Ken Kutaragi take the fall? Or is his departure from SCEI simply his own wish to move on?

Pacific Crest Securities analyst Evan Wilson seems to believe that Kutaragi was squeezed out. He told Bloomberg.com that Kutaragi's retirement is "likely an indication Sony corporate isn't satisfied with the initial success of the PS3."

IDC analyst Billy Pidgeon agrees. Pidgeon believes that Sony CEO Howard Stringer is probably trying to save face, following the PS3's early struggles. "Sony had too much hype and not enough delivery," he told the AP. "Sony didn't notice that their audience was dwindling and didn't increase the base by playing to a wider demographic, and instead it played the old-school game of playing to the 18- to 32-year-old male early adopter. Nintendo saw this as a strategic flaw, and the Wii has basically become the disruptive product."

Other analysts aren't so sure that this was an attempt to save face. "[The move] probably [had] more to do with software and the PSP than with the PS3," Wedbush Morgan Securities analyst Michael Pachter told GameDaily BIZ. "It can't be his fault that the cost of the box was so high, and I have a tough time believing he insisted on Blu-ray. They probably just all agreed it was time to move on. Sony didn't have a great lineup of first party software for the PS3 or the PSP, and didn't get as much third party support this time around. I think Kaz Hirai is great, and the company probably doesn't need a visionary for another 10 years. They need an operations guy, need to drive costs down, and need to develop more software support (internal and external). Hirai will be great at that."

Indeed, the general consensus is that the promotion of Hirai is a positive for SCE. Lazard Capital Markets analyst Colin Sebastian agreed, telling GameDaily BIZ, "I believe Sony is working to improve the day to day management of the PlayStation group, and also to address some of the strategic issues related to the PS3 development. Kaz Hirai is a very capable leader for PlayStation, in my view, and I think he will be very visible in trying to steer the PS3 to a more respectable position in the market."

John Taylor, an analyst with Arcadia Research, noted that Kutaragi's departure combined with the elevation of Kaz Hirai could have some very interesting implications. "First, we may see Sony redoubling efforts to make the PS3 and future products more net centric," he told us. "Kaz brings a new level of awareness of Western preferences and technology trends to SCE. He has firsthand experience with dealing with Microsoft's online momentum in the U.S. competitive environment."

He continued, "Second, we may see more investment going into creation of product specifically for Western markets. Not that long ago, Sony had a robust first party studio system in the U.S., which was largely dismantled, and a lot of work was moved to second party studios. Sony may recognize that more investment in PS3 exclusive first party titles may be necessary over the life of the platform. Third, we may see decision making get more decentralized, because the process of getting PS3 completed and into the market simply took too long and went through too many stops. Sony faces a raft of new challenges that weren't expected a year ago, and quicker responsiveness will be important both in the near and long term."

[UPDATE] In an e-mail to GameDaily BIZ, AG Edwards analyst Bill Kreher added his thoughts on the situation, remarking, "The PS3 obviously has had a rough start and I would question whether Kutaragi would still be leaving if the console had been better received by the marketplace."