Kutaragi, 56, known as the “Father of PlayStation,” steps down at a time when the new PlayStation 3 has made a weaker-than-expected showing against Microsoft Corp.’s Xbox 360 and Nintendo Co. Ltd.’s Wii console.

He will become honorary chairman of Sony Computer Entertainment Inc. and act as a senior technology adviser to parent Sony Corp.

Kaz Hirai, the unit’s current president and chief operating officer, has been promoted to president and group chief executive in charge of the PlayStation business.

The success of PlayStation 3 in the $30 billion game market is critical for Sony’s fledgling earnings recovery, analysts say. The company has lost its lead in other key product areas such as portable music players.

Kutaragi invented the original PlayStation in 1994 and the PlayStation 2 in 2000.

Those consoles, which have an installed base of more than 200 million units globally, dominated the competition.

But high PS3 production costs pushed Sony’s game division to a likely loss of more than 200 billion yen, or around $1.7 billion, in the past business year.

In a statement, Kutaragi said he would pursue work beyond PlayStation and accelerate his network vision: “I’m looking forward to building on this vision in my next endeavors.”

Sony’s American depositary shares fell 1.7 percent, or 92 cents, to $54.30 on the New York Stock Exchange.

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