Sony Year-end/4Q Financials

[dobwal]

How can Sony lose hundreds of millions if the PS3 hardware isn't making them a loss?! What on earth are they spending on such that selling break-even hardware and profitable software including media downloads, they still manage to lose hundreds of millions?

Given that Sony's fiscal year ends on March 31 and the PS3 only been profitable since March would mean to me that for 11 months out of the fiscal year 09 the PS3 produced losses. Plus Q3 (holiday quarter) being profitable is not indicative of anything because most of the consoles sold during this period don't have their production costs recorded during Q3. This is why Sony's game business have been able to produce profits during Q3 a couple time prior to the last Q3. Most of the losses is probably still attributed to the PS3.

 

[boommoob1]

Last year included a one time write-down on inventory because of the price-cut to phats when the slim was released. They were supposed to be mostly sold out, but they weren't and Sony had to write off around $300m in lost earnings.

http://forum.blu-ray.com/blu-ray-ga...-results-sets-ambitious-ps3-sales-target.html

 

[Laa-Yosh]

Once the hardware becomes lossless, the income should be billions, as with PS2. What we're saying here is the losses on the first two quarters, the Spring and Summer ones with least sales, outweighed the profits on lossless hardware and all that top-tier software sold, thanks in considerable part to operating costs.

- PS2 1st party software sold far better and they've spent a lot less money on it; difference to the previous generation is probably in the hundred millions.

- PS2 3rd party sales were several times higher, with more then a hundred million+ sellers and overall software sales above a billion units; PS3 is between 150 to 200 million units IMHO (could use attach ratio to calculate, I guess it's around 6?)

- PS2 required at least one memory card to save game state, which was probably around $10 of pure profit per system. That's another billion lost now that all systems have hard drives. I wonder what other accessories Sony skipped on (and don't forget how much MS can charge for additional HDDs, Wifi, remotes etc. which is why they're already making a steady profit)

Just these three add up to a huge loss of income which should explain a lot. Add the gigantic R&D investment in Cell and to some extent in blu-ray, and you can see how wrong it all went...

 

[Toaddio]

Just these three add up to a huge loss of income which should explain a lot. Add the gigantic R&D investment in Cell and to some extent in blu-ray, and you can see how wrong it all went...

If you would just read several of the posts after the one you quoted you would have found the answer.

 

[patsu]

Yap, and Blu-ray has already been moved out to a different business unit, not to mention it will stack another wave of 3D consumer devices and media services. So should be a huge money maker for Sony Group over time.

Sony did lose revenue for not "close sourcing" HDD, Wifi, remotes, headset, etc. but I don't really condone selling expensive commodity peripherals. They have their own brand of remotes and headsets to sell. They will try to grab more of the peripheral pie via PSEye, PS Move motion and navigation controllers.

I think Sony NPD is handling a lot of development:
* PSN and integration with Sony Online Services (moving or moved to the new unit ?)
* 3D gaming and PS Move
* PSP2 vs 3DS and iPhone
* eBook vs iPad and Kindle

 

[Akumajou]

It isn't aggressive. Sony sold 9.6 million PS3s within the last 6 months of the fiscal year. 15 million shouldn't be much of a problem, even without a price cut.

AFAIK, Bloomberg said they stopped losing money soon after the release of the slim model.

Sony can always do a pack in game or variations to try and stimulate purchases with no price cut, Nintendo is on to something.

 

[corduroygt]

IThey also mentioned that R&D into "next-gen" platforms played a part in reducing profits; they said they felt it was too early to go into it, but that of course resources were being presently dedicated to the effort. I think that's obvious and something we've all known and realized, but it is the first time to my knowledge that it has been highlighted in an earnings call, leading me to believe that expenditures in that area are beginning to ramp up a little maybe.

I wonder if those "next-gen" platforms also include the R&D that's going into Move.

 

[dobwal]

It isn't aggressive. Sony sold 9.6 million PS3s within the last 6 months of the fiscal year. 15 million shouldn't be much of a problem, even without a price cut.

AFAIK, Bloomberg said they stopped losing money soon after the release of the slim model.

I consider it aggressive because 9.6 million came in response to a price drop and a new form factor. I highly doubt that you can increase sales level without a further price cut. The introduction of their new motion controller is not going to entice the current userbase to reinvest into a newer PS3 like the Slim, so I doubt its going to trigger the same type of sales response especially considering its feature offered on a cheaper leading product for years.

 

[deepbrown]

The problem here would thus be that their gaming division is a hole then. If infrastructure etc. is costing that much now, they're going to make such an insane loss this entire generation it's untrue! Once the hardware becomes lossless, the income should be billions, as with PS2. What we're saying here is the losses on the first two quarters, the Spring and Summer ones with least sales, outweighed the profits on lossless hardware and all that top-tier software sold, thanks in considerable part to operating costs. How does Sony get out of that one then? They have to find $400 million just to break even. Where are they going to get billions in profits if their games and content isn't enough?

Did you even read my post? The gaming division was profitable for two quarters in a row. Profitable ever since the Slim released. The games division is now profitable. End of....they make it back from now on with a profitable business. It'll take time, but it always has.

The games division lost $500 USD for the year, but all these losses, ALL of them were made before the PS3 Slim launched. After the PS3 Slim launched the games division has been profitable for both quarters. Now, since March, the hardware itself doesn't make losses, so its even brighter for the games business.

 

[deepbrown]

I consider it aggressive because 9.6 million came in response to a price drop and a new form factor. I highly doubt that you can increase sales level without a further price cut. The introduction of their new motion controller is not going to entice the current userbase to reinvest into a newer PS3 like the Slim, so I doubt its going to trigger the same type of sales response especially considering its feature offered on a cheaper leading product for years.

A very small percentage reinvested - along the lines of 1% or lower. Most sales came from new consumers who were happy with the $299 price point. And the sales momentum has continued. 2.2 million is up by 600,000 in the last quarter...and NPD sales are still up 40% as they have been for the past 7 months. The momentum hasn't slowed.

 

[NathansFortune]

Did you even read my post? The gaming division was profitable for two quarters in a row. Profitable ever since the Slim released. The games division is now profitable. End of....they make it back from now on with a profitable business. It'll take time, but it always has.

The games division lost $500 USD for the year, but all these losses, ALL of them were made before the PS3 Slim launched. After the PS3 Slim launched the games division has been profitable for both quarters. Now, since March, the hardware itself doesn't make losses, so its even brighter for the games business.

Indeed. People should be looking at the trend not the annual figure. It is clear the trend is towards profitability since the phat was canned and the slim has been released. NPS is loss making this Q because of the poor performance of Vaio and Walkman which is down to poor product portfolio in both divisions.

The actual losses for the Q in NPS is around $70m net and $30m operating. While SCE itself is said to be turning a profit of sorts which is only going to increase since the release of the CECH-210x. There is also one more cost reduction planned for this financial year which should see the release of the CECH-220x, not sure what is planned for it, maybe they have got 40nm RSX and 45nm Cell merging onto a single package or Cell is going down to 32nm. Either way there is at least on cost reduction due this financial year which should allow for bundling of games/Move or a price reduction.

For Sony as a whole the next few years really come down to how well 3D and Blu-ray are adopted. If they both do well then Sony will do very well, but if take up is mediocre then they will be relying on media profits while electronics is refocussed to the next big thing. At the moment it looks good, but I feel they should be diversifying their product portfolio in electronics just in case things go tits-up. OLED looks like it will be successful and so does Wireless HD or Wi-Gig (not sure which one Sony is signed up to), so a combination of the two could lead to the holy grail of wall hung TVs.

Finally it is time to get serious about Sony Ericsson. Something needs to be done, they have been dragging down group profitability more than PS3 over the last 4 years, they are consistently lttp, and when they do make it they have awful execution. Sony need to get something done about them. The reason why SE are so awful is pretty obvious, the company is full of buzzword managers and not people who know good hardware and software.

 

[Rangers]

Did you even read my post? The gaming division was profitable for two quarters in a row. Profitable ever since the Slim released. The games division is now profitable. End of....they make it back from now on with a profitable business. It'll take time, but it always has.

The games division lost $500 USD for the year, but all these losses, ALL of them were made before the PS3 Slim launched. After the PS3 Slim launched the games division has been profitable for both quarters. Now, since March, the hardware itself doesn't make losses, so its even brighter for the games business.

Where are you getting any of these figures? Link please? Where do you get that the game division was profitable the last two quarters? Link?And where's your proof Vaio and Walkmen are losses? In fact I think Sony called out Walkmen divisions as a profit leader.

Seems a lot of rosy speculation without any proof going on here.

Here's what their slide said: http://www.sony.net/SonyInfo/IR/financial/fr/viewer/09q4/slide/image/10_image.jpg

<Operating income loss lower> due to "Improved profitability of products including Walkman digital music players"

The improvement was partially offset by deterioration in the game business"

Now that doesn't explicitly prove what you guys (Nathan Drake) are saying is wrong, but if anything it rather implies the opposite of what you're saying.

The only thing I've seen is that network services lost $839 million on the year. I dont see any of these other numbers you're posting. I dont see any breakout of "game" separate from Network services either, so there is no way to say what Game is doing.

also, how much did network services lose in the 4thQ? Should be easy, their losses in the first 3 can give us their losses in the 4th, as is usually done here. Anybody have that?

they make it back from now on with a profitable business. It'll take time, but it always has.

They're probably never going to make back what they lost on Ps3, which is probably something like 7 billion now. Heck, MS will have a hard enough time getting lifetime profitability on 360, which started from a much smaller hole.

 

[Rangers]

I consider it aggressive because 9.6 million came in response to a price drop and a new form factor. I highly doubt that you can increase sales level without a further price cut. The introduction of their new motion controller is not going to entice the current userbase to reinvest into a newer PS3 like the Slim, so I doubt its going to trigger the same type of sales response especially considering its feature offered on a cheaper leading product for years.

I'm not sure where people are getting the 9.6 figure. I have 6.5+2.2=8.7 over the last 6 months.

 

[deepbrown]

I'm not sure where people are getting the 9.6 figure. I have 6.5+2.2=8.7 over the last 6 months.

OK time for getting the sources for you.

And...you've missed a quarter. Q2 plus Q3 = 9.6 million (3.2 plus 6.5)

 

[larrylain]

so SONY made profit from the 4th quarter as reported by ONEDA

so unless SONY is releasing a new console this year, they are destined to make atleast some profits for the fiscal year 2010 , which is nice

also the ps3s with updated 40nm RSX have started shipping to stores, as confirmed by IGN through a SONY exec.

so even more profits for SONY, which is nice

 

[larrylain]

The game business lost in the first two quarters of the 2009 fiscal year...made money in the third...and we presume made money in the fourth. It's now in the Network operations, with the loss-making Vaio business. That section lost hardly anything in this quarter...so it could be implied that the Games business wasn't the loss making sector in Q4.

PS3 now makes a profit on each one sold....since March.

Actually I was right, the Game business again made a profit in Q4: "The game business achieved a profit in the fourth quarter due to strong sales of first-party software and the elimination of negative margins on the PS3," said Nobuyuki Oneda, chief financial officer of Sony, at a Tokyo news conference."

So that's two quarters out of 4. Shame we can't see the numbers now that they're combined.

well

u can presume that SONY is making even MORE profit with the 40nm RSX based PS3s which have lately been shipped to stores, as confirmed by IGN. They were making profits from the 65nm version and also because the price of Blu-ray diodes fell back in March. But with the 45nm version , i am sure they are making even MORE profit that what they were making in march

 

[Titanio]

Where are you getting any of these figures? Link please? Where do you get that the game division was profitable the last two quarters? Link?

I'm not sure if they gave a specific figure for the game business, but they did explicitly say in both their Japanese and Overseas conference calls that the game business was profitable in Q4 (and Q3 also).

http://www.sony.net/SonyInfo/IR/info/presen/index.html

Also, regarding Vaio queries earlier in the thread, in one of those calls they revealed that Vaio reported a loss over the FY.

Other segments in NPS are also loss-making, including 'new businesses' like their network services stuff (which is I think ex-PSN, which is under Game, but not sure).

also, how much did network services lose in the 4thQ? Should be easy, their losses in the first 3 can give us their losses in the 4th, as is usually done here. Anybody have that?

NPS lost 7bn yen ($75m) in Q4.

Again, the game segment reported profit in this same period.

The other segments of NPS are certainly large enough in concert to significantly skew any picture one might try to dissect re. game (positively or negatively. In Q4, a quiet quarter relatively, results were skewed by $75m+ vs Game alone). I don't think NPS results should be remotely taken as 'Game' results. In revenue terms, SCE/Game is only half of NPS.

 

[Rangers]

OK time for getting the sources for you.

And...you've missed a quarter. Q2 plus Q3 = 9.6 million (3.2 plus 6.5)

Last 6 months?

 

[deepbrown]

OK some information:

"The company stopped losing money from PS3 consoles in March and will likely post an annual profit of at least 1 billion yen this year from PS3," Oneda.

On a forecast of 15 million PS3's, that's 72 cents per console. This looks like there's going to be another PS3 price cut in this fiscal year - probably end of the year and probably $50 (with Move bundled at current price point)

"The game business achieved a profit in the fourth quarter due to strong sales of first-party software and the elimination of negative margins on the PS3," said Nobuyuki Oneda, chief financial officer of Sony, at a Tokyo news conference.

The turnaround came too late in the year to reverse losses at the game business, which lost around ¥50 billion (US$540 million), but Sony anticipates it will be able to report much rosier results this time next year.

http://www.goodgearguide.com.au/article/346492/sony_playstation_3_turns_profitable/

As for Q1, Q2 and Q3: Q1 -$413,541,667, Q2 -$653,333,333, Q3 +$210,629,750

http://neogaf.net/forum/showpost.php?p=19625436&postcount=90

As for Q4 - the Networks division (which quarter were they combined?) it lost 7 billion yen in the quarter - or around $76 million USD. Not very much in comparison to Q1 and Q2 - and points strongly to the Games division's second quarter of profit (which was revealed by Sony in the call)

http://i43.tinypic.com/110vl2r.png

Posted all sources, so I hope that helps.

 

[Carl B]

Finally it is time to get serious about Sony Ericsson. Something needs to be done, they have been dragging down group profitability more than PS3 over the last 4 years, they are consistently lttp, and when they do make it they have awful execution. Sony need to get something done about them. The reason why SE are so awful is pretty obvious, the company is full of buzzword managers and not people who know good hardware and software.

Sony Ericsson is definitely a mess, but I don't recall the damage being four years in length; in fact up until recent years they were a decent contributor to the bottom line. And obviously, the multiple billions PS3 has cost Sony dwarf the losses SE is presently incurring.