It seems Sony PS3 supports only FAT32 and the external drive comes pre-formatted with NTFS. So, after franatic search on blogs (and Seagate is *NO* help), finally figured out that they do have a tool called Disc Wizard to do this.
Warning: This is pre-programmed to work only their products.
Once you download and install this, connect the USB drive, startup the app.
Remove the existing partition (this will remove all existing contents on your drive, so be sure be very sure) and the tool offers formatting types. Choose FAT32. It takes about a couple of minutes and you are done!