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'The backwards compatibility is not going to be as good as the US and Japan models,' confirmed a Sony spokesman.

The PS3 was first launched in Japan and North America in November and the model that will be introduced in Europe will be designed differently.

Software will take over some of the functionality that was originally taken care of by dedicated chips, which means far fewer PlayStation 2 (PS2) games can be played on a European PS3 compared with the Japanese and American PS3 models which play 98 percent of old games.

'Sony is managing expectations by saying now that the new console will play fewer of the old games, and that's a good thing,' said analyst Alex Kwiatowski at British market research group Vertical Market Technologies.

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the last 18 months Sony has had a series of public relations disasters, including a recall of nearly 10 million of its computer batteries, PS3 delays and a software program on Sony Entertainment music CDs that breached computer security.

Kwiatowski said gamers with a PS2 would have to hold onto their device to play their current collection.

'I'm as disappointed as the next game player about the reduced backward compatibility, but even the most nostalgic, misty-eyed gamers will have their steely hearts impressed by the new features that PS3 games provide,' Kwiatowski said.

'Rather than concentrate on PS2 backwards compatibility, in the future, company resources will be increasingly focused on developing new games and entertainment features exclusively for PS3,' Sony Computer Entertainment said in a statement.

About one million units will be available at the European launch next month, as many as were made available in the United States during the first six weeks after the launch last year.

Sony loses money at first on each PS3 sale due to high production costs.

But Nobuyuki Oneda, Sony's chief financial officer, said in January the company aims to bring the negative PS3 margin to break-even toward the second half of the next business year, which starts in April, by component cost savings on chips driving the PS3.