No, I don't think so. I believe it's more the market liking 'simple' companies who make money combined with being in an industry jacked up by (perhaps overly) optimistic growth predictions. I read a piece somewhere talking about $10 billion net income for Nintendo not being 'unrealistic' for 2010 (which would more than triple what they're on track for fiscal '07). Even if one consider them to be vastly overpriced, their EPS to price ratio is beating Sony's by more than 30%.
Wii After a Year
- Thread starter fearsomepirate
- Start date
tongue_of_colicab
Veteran
Maybe they make more money but they also have to spend more money on production and stuff. So even if they have more money coming in they also have alot more going out.
Yeah. Even with exploding Wii and DS sales, Sony is moving more than three times as much money around as Nintendo. On the bottom line, however, Nintendo is kicking Sony's arse 2:1. Their almost 20% net profit sounds much better than Sony's 3.5%. Add growth predictions, market leadership and a relatively low risk profile; that's what you get. Pre-DS the situation was very, very different.
archangelmorph
Veteran
Corperate valuation has alot more to do with company size (number of staff, assets etc..) & revenue than mid-term fiscal profitability..
Figure I dig up the recent numbers (first off Nintendo only is listed in Japan so they only have to report semiannually instead of quarterly as a result need to combine Sony's last 2 reports). Overall we can see that Sony sells ~5.7 times as much Nintendo but they both have a similar operating and net income which is kinda scary.
Nintendo (Semiannual Reports)
1st Half
Net Sales ¥694.8 billion
Operating Income ¥188.8 billion
Net Income ¥132.4 billion
Sony (Quarterly Report)
1st Quarter
Net Sales ¥2.0 trillion
Operating income ¥99.3 billion
Net income ¥66.5 billion
2nd Quarter
Net Sales ¥2.08 trillion
Operating Income ¥90.5 billion
Net Income ¥73.7 billion
1st Half Total
Net Sales ¥4.08 trillion
Operating Income ¥189.8 billion
Net Income ¥140.2 billion
Nintendo (Semiannual Reports)
1st Half
Net Sales ¥694.8 billion
Operating Income ¥188.8 billion
Net Income ¥132.4 billion
Sony (Quarterly Report)
1st Quarter
Net Sales ¥2.0 trillion
Operating income ¥99.3 billion
Net income ¥66.5 billion
2nd Quarter
Net Sales ¥2.08 trillion
Operating Income ¥90.5 billion
Net Income ¥73.7 billion
1st Half Total
Net Sales ¥4.08 trillion
Operating Income ¥189.8 billion
Net Income ¥140.2 billion
Often true, but recently it seems it's more important to do one or some things very well than many things averaging OK. Being a diverse and complicated ACME isn't necessarily the best thing, even if you're operating in growing markets. On the other hand, you're much more resilient when things go (temporarily) bad.
Whoops... I compared quarterly to biannual data so the ratios in my last couple of posts were off...
Still. Nintendo is kicking serious arse these days.
More importantly, Sony has a shed-load more assets than Nintendo. Sony have fabrication plants, recording studios, movie studios, more gaming studios, and whatnot. If you were to sum up all Sony's assets and all Nintendo's, Sony will come out the far bigger company, and if you were to buy Sony, you'd need to pay for all that other stuff too. eg. Nintendo's first half-year profits would have bought them Sony's chip fabs for Cell with a bit of change.
Sony may not be the most profitable company in the world, but they are very big!
Sony may not be the most profitable company in the world, but they are very big!
archangelmorph
Veteran
True but this is irrelevant in the world of business.. the fact remains that Sony has far more assets & far more value tied into equity than nintendo and as a result is going to be worth far far more..
When valuating a company you don't just look at the short term profitability especially since, in a volatile market (like this one) someone could come along and pay an exthortionate amount of money for your company &, after 2 years of market changes and bad corporate decision making, end up stuck with a company worth only a fraction of what they paid for it..
Hard assets & equity remain stable for much much longer in terms of value & that's why these aspects are much more important when summing up the worth of a corporate entity..
No, you'd have to pay for the majority of outstanding Sony stock. Many a time have companies been bought for less than the actual value regained just by shutting down everything and selling off physical property. The market isn't all that rational all the time.
How much has Sony listed as assets anyway?
The current stock market disagrees.
http://www.sony.net/SonyInfo/News/Press_Archive/200402/04-011E/
In 2004 it was ¥3,663,008 million for Sony Corp and ¥176,370 million for the Sony Financial holdings if I read this right. And let's not forget Sony Ericsson, which should be very big too.
EDIT: Q2 07 results say 4.993.995 mio. Yen total assets which is about 45 billion US $.
EDIT2: wrong quote, says 12.470.860 total, so about 112 bio. US
In 2004 it was ¥3,663,008 million for Sony Corp and ¥176,370 million for the Sony Financial holdings if I read this right. And let's not forget Sony Ericsson, which should be very big too.
EDIT: Q2 07 results say 4.993.995 mio. Yen total assets which is about 45 billion US $.
EDIT2: wrong quote, says 12.470.860 total, so about 112 bio. US
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Just goes to show...
Actually, with holdings like that and some slight cashflow problems being covered by sales of assets lately, they almost sound like an acquisition target. Anyone got 47.7 billion to spend? You'll possibly make out up to 2:1 by slaughtering it and selling off the parts.
archangelmorph
Veteran
isn't it 112 billion..?
Also wouldn't that be an incredible waste of money..? (buying a company for the sake of destroying it and selling it off in bits..)
$47.7 billion is the value of outstanding stock. Control the stock, control the company. And, no: It certainly wouldn't be a waste of money, it would be a good investment. Looking at Sony's current profits you'd have to stay in for 30+ years to make that kind of cash as an owner. Happens all the time.
At any rate, I was being factitious. Not all those assets can be converted to easy cash (edit: there's debt and other liabilities -- assets really isn't a good measure for 'net worth', for that we should look at equity), and with a company like Sony any attempt at such a maneuver would probably get blocked faster than you could say PS3.
Oh, well. As to finish off my original point that started this little stroll off topic: Sony isn't in a position to purchase Nintendo. With a mediocre stock performance, they'd have to sell off and/or borrow against the majority of their assets and they'd still probably come up short of the odd $80 billion or so they'd need. Nintendo on the other hand, being one of the the Wunderkids of the Japanese stock market, could probably manage (if the shareholders agreed) to borrow a shitload of money against their own stock. In addition to the $10 billion they've got lying around, $37 more should be doable. They probably still wouldn't have been able to purchase Sony as it stands, though, but as I said: If the Wii goes on as it has been...
At any rate, I was being factitious. Not all those assets can be converted to easy cash (edit: there's debt and other liabilities -- assets really isn't a good measure for 'net worth', for that we should look at equity), and with a company like Sony any attempt at such a maneuver would probably get blocked faster than you could say PS3.
Oh, well. As to finish off my original point that started this little stroll off topic: Sony isn't in a position to purchase Nintendo. With a mediocre stock performance, they'd have to sell off and/or borrow against the majority of their assets and they'd still probably come up short of the odd $80 billion or so they'd need. Nintendo on the other hand, being one of the the Wunderkids of the Japanese stock market, could probably manage (if the shareholders agreed) to borrow a shitload of money against their own stock. In addition to the $10 billion they've got lying around, $37 more should be doable. They probably still wouldn't have been able to purchase Sony as it stands, though, but as I said: If the Wii goes on as it has been...
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tongue_of_colicab
Veteran
Doubt that as thats exactly what alot of those big investment companies do (forgot how they are called). Buy a company and sell it off in pieces to make a quick profit.
Even though sony has all that, Nintendo is the second most expensive Japanese company. Having more assets doesnt mean your automatically worth more. How much investors are willing to pay is also important even if the actual value of the company might never be that high.
When was the last time that idea was suggested on this forum? I think 'all the time' is hyperbole fitting of contemporary console promotion!
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