PSX3 and PSP blamed for Sony Group's poor performance..
- Thread starter DeadmeatGA
- Start date
Megadrive1988
Veteran
IBreL 
Sony had better be spending massive amounts on R&D otherwise PS3 could be in serious trouble ( and its not )
Sony had better be spending massive amounts on R&D otherwise PS3 could be in serious trouble ( and its not )
Chris Morris over at CNN seems to have a bone to pick with SCE (written in the 2nd person no less!)...
http://money.cnn.com/2003/10/23/commentary/game_over/column_gaming/index.htm
http://money.cnn.com/2003/10/23/commentary/game_over/column_gaming/index.htm
nondescript
Regular
Once again, thanks Sonic for taking charge and giving a semblance of order. Don't know why this thread was reopened, but oh well. <shrug>
Sony actually did slightly more business than last quarter.
The consumer electronics division sold 1.4% less stuff, but actually made more 36.2% more money (operating profit). Probably because they getting out of low-margin businesses like CRT-TV's (hence the layoffs) and improvements in manufacturing techniques.
They are selling less games and consoles than last year, partially because of labor problems, and partially because they sold so many last year, and most people who want a PS2 have one.
Because some of the profits were used in R&D, the money spent did not show up in the operating profits (I don't know why, since technically this would be net profit, not operating profit, but it must be some internal accounting procedure)
The Sony Group continues to put more money into R&D, including capital investments such as semiconductor manufacturing assets. They obviously do not see the impending doom that has been prophised by some.
They spent part of their operating profit, so consequently net profit is lower. Investors will get smaller dividends this year, depressing the stock price.
The Usual Disclaimer: I don't expect that anyone will be convinced, I'm just presenting my view. If Dante's philosophers were still debating the existence of God after being damned to the deepest circle of hell, I certainly don't expect to convince anyone here.
Sony actually did slightly more business than last quarter.
The consumer electronics division sold 1.4% less stuff, but actually made more 36.2% more money (operating profit). Probably because they getting out of low-margin businesses like CRT-TV's (hence the layoffs) and improvements in manufacturing techniques.
They are selling less games and consoles than last year, partially because of labor problems, and partially because they sold so many last year, and most people who want a PS2 have one.
Because some of the profits were used in R&D, the money spent did not show up in the operating profits (I don't know why, since technically this would be net profit, not operating profit, but it must be some internal accounting procedure)
The Sony Group continues to put more money into R&D, including capital investments such as semiconductor manufacturing assets. They obviously do not see the impending doom that has been prophised by some.
They spent part of their operating profit, so consequently net profit is lower. Investors will get smaller dividends this year, depressing the stock price.
The Usual Disclaimer: I don't expect that anyone will be convinced, I'm just presenting my view. If Dante's philosophers were still debating the existence of God after being damned to the deepest circle of hell, I certainly don't expect to convince anyone here.
DeadmeatGA
Banned
...
SCEI barely broke even with an annual R&D budget of $400 million until this quarter; it will surely dip into red once the R&D budget is doubled to $800 million to complete PSX3 and PSP, as well as bills for its new fabs arrive.
After SCEI bleeds a couple billion, it will come under a heavy pressure to restructure and turn a profit like any other units, which will be tough with such a high fixed cost.
PSX3 business model can be supported only if PSX3 does more business than PSX2 did. It doesn't appear to be heading in that direction at this point, with a falling demand.
SCEI barely broke even with an annual R&D budget of $400 million until this quarter; it will surely dip into red once the R&D budget is doubled to $800 million to complete PSX3 and PSP, as well as bills for its new fabs arrive.
After SCEI bleeds a couple billion, it will come under a heavy pressure to restructure and turn a profit like any other units, which will be tough with such a high fixed cost.
PSX3 business model can be supported only if PSX3 does more business than PSX2 did. It doesn't appear to be heading in that direction at this point, with a falling demand.
Panajev2001a
Veteran
What did you say about Dante ????
They were not sent to the deepest ( in terms of height as the Hell is struvtured ) the Spirita Magna are not even in Hell.
I am not sure when you read Dante's Commedy, but Aristotle, the master of all who know, is clearly not in eternal pain/damnation.
Sony ought to do this: PSP and PlayStation 3 need to be kick-ass products as they launch against fiercer competition.
Also a good deal of that money goes to R&D of new fabs and new manufacturing processes ( which have enabled PlayStation 2 to be profitable and drop in price putting Xbox's profits into trouble and into the red even more ): CELL will not only be used by SCE and the fabs built for SCE will also be used by the other Sony subdivisions.
They decided to re-organize once more around the technology active side of the company allowing the whole Sony group to move forward: it is a scandal how good Sony has become in chip manufacturing over the past few years thanks to SCE and related R&D efforts and the rest of Sony group manufacturing like only 20% of the chips in-house and buying $2 Billion worth of ICs from therid parties and competitors.
You cannot pretend to compete with manufacturer A when it is manufacturer A-syster company which sells you the chips you are going to use: tip, you are not going to get the best deal compared to company A's own products.
Now they consolidated all the Semiconductor R&D in one virtual center ( you will not have Sony Electronics doing R&D for chips competing basically with SCE, etc... ) basiclaly around SCE which was the smart idea: they have 4 fabs now ( two, in Oita, co-owned with Toshiba and two at Nagasaki fully owned by SCE and Sony ) and very intelligent partners such as Toshiba and IBM in micro-processor and manufacturing technology research which is helping them.
One side of Sony kept stayign on the technological edge and looked forward in the future while other sides like Sony Electronics have been a bit too happy with the money that SCE helped to make.
When you consolidate and re-organize there is money to be spent and when you have hot new technologies like CELL investing money in R&D is not a bad choice: there could be better moments, but this has to be done now and it is better that they start including Semiconductor R&D in their Yearly and Quarterly reports so that these expenses can spread over three years and not all during the launch of PlayStation 3.
They were not sent to the deepest ( in terms of height as the Hell is struvtured ) the Spirita Magna are not even in Hell.
I am not sure when you read Dante's Commedy, but Aristotle, the master of all who know, is clearly not in eternal pain/damnation.
Sony ought to do this: PSP and PlayStation 3 need to be kick-ass products as they launch against fiercer competition.
Also a good deal of that money goes to R&D of new fabs and new manufacturing processes ( which have enabled PlayStation 2 to be profitable and drop in price putting Xbox's profits into trouble and into the red even more ): CELL will not only be used by SCE and the fabs built for SCE will also be used by the other Sony subdivisions.
They decided to re-organize once more around the technology active side of the company allowing the whole Sony group to move forward: it is a scandal how good Sony has become in chip manufacturing over the past few years thanks to SCE and related R&D efforts and the rest of Sony group manufacturing like only 20% of the chips in-house and buying $2 Billion worth of ICs from therid parties and competitors.
You cannot pretend to compete with manufacturer A when it is manufacturer A-syster company which sells you the chips you are going to use: tip, you are not going to get the best deal compared to company A's own products.
Now they consolidated all the Semiconductor R&D in one virtual center ( you will not have Sony Electronics doing R&D for chips competing basically with SCE, etc... ) basiclaly around SCE which was the smart idea: they have 4 fabs now ( two, in Oita, co-owned with Toshiba and two at Nagasaki fully owned by SCE and Sony ) and very intelligent partners such as Toshiba and IBM in micro-processor and manufacturing technology research which is helping them.
One side of Sony kept stayign on the technological edge and looked forward in the future while other sides like Sony Electronics have been a bit too happy with the money that SCE helped to make.
When you consolidate and re-organize there is money to be spent and when you have hot new technologies like CELL investing money in R&D is not a bad choice: there could be better moments, but this has to be done now and it is better that they start including Semiconductor R&D in their Yearly and Quarterly reports so that these expenses can spread over three years and not all during the launch of PlayStation 3.
Panajev2001a
Veteran
Re: ...
No Deadmeat,
CELL is not a SCE bound product and the fabs SCE will have are going to be used by the rest of Sony ( they are not SCE bound either ): remember they will have a consolidated Semiconductor R&D group now ( essentially built around SCE ).
Ken Kutaragi made a smart choice and this is part of the progress he must do if he wants to be at Sony's C.E.O. in the future: the R&D budget of SCE was increased as they finally decided to have such a strong Semiconductor division help with its work other subpdivisions at Sony thus wasting less money over-all in the future.
If we can increase the production of ICs in-house compared to the ICs that are bought from third-parties and competitors we would save at least $1 Billion each year or more ( when fab capacity has increased enough ).
Sony's PSX will be produced in SCE fabs basically even if it is not a SCe product its chip will come from SCE's 90 nm lines and this is only an example.
You also cannot compare the performance of SCE ( great ) with the shoddy one Sony Electronics and Sony Music have shown and the popularity of Ken Kutaragi even between investors with the popularity of other big guys at Sony.
SCE has already a good structure and it is not showing any sign of being grossly inefficient: something Sony Electronics and Sony Music certainly cannot claim.
PlayStation 2 sales will pick up again and they have not launched the re-designed PSTwo yet and I think as a platform both software and hardware wise it will be a popular format for a while.
Also, I have good hopes for the PSP ( which is produced in the same lines which manufacture the 90 PSX SoC ).
DeadmeatGA said:
No Deadmeat,
CELL is not a SCE bound product and the fabs SCE will have are going to be used by the rest of Sony ( they are not SCE bound either ): remember they will have a consolidated Semiconductor R&D group now ( essentially built around SCE ).
Ken Kutaragi made a smart choice and this is part of the progress he must do if he wants to be at Sony's C.E.O. in the future: the R&D budget of SCE was increased as they finally decided to have such a strong Semiconductor division help with its work other subpdivisions at Sony thus wasting less money over-all in the future.
If we can increase the production of ICs in-house compared to the ICs that are bought from third-parties and competitors we would save at least $1 Billion each year or more ( when fab capacity has increased enough ).
Sony's PSX will be produced in SCE fabs basically even if it is not a SCe product its chip will come from SCE's 90 nm lines and this is only an example.
You also cannot compare the performance of SCE ( great ) with the shoddy one Sony Electronics and Sony Music have shown and the popularity of Ken Kutaragi even between investors with the popularity of other big guys at Sony.
SCE has already a good structure and it is not showing any sign of being grossly inefficient: something Sony Electronics and Sony Music certainly cannot claim.
PlayStation 2 sales will pick up again and they have not launched the re-designed PSTwo yet and I think as a platform both software and hardware wise it will be a popular format for a while.
Also, I have good hopes for the PSP ( which is produced in the same lines which manufacture the 90 PSX SoC ).
marconelly!
Veteran
When GC and Xbox each reach 60 million sold units, while selling for $200, we'll discuss about 'falling demand'. Untill then, just suck it up and realize that PS3 will be just as much of a success as PS1 and PS2 were.
Panajev2001a
Veteran
zurich said:
They are both getting it around the same time: PSX is not out yet.
Deadmeat they taught you no manners at school and home or do you prurposely wish to enrage people when you keep on going on about PSX3 this and PSX2 that.............. please finally will you STOP.
WRT this thread, if Sony pull off another PS2 with the PS3 now would be an excellent time to buy Sony shares as a mid term investment (3-4 years).
Investing in the future is a tricky business, investing in the next Playstation is a 'no brainer.'
The very small print disclaimer: I am not responsible if you lose your house, job, wife etc or worse still if you go bald. If you decide to remortgage your house and invest in Sony you do it of your own freewill however if you make any profits I want a 10% cut.
WRT this thread, if Sony pull off another PS2 with the PS3 now would be an excellent time to buy Sony shares as a mid term investment (3-4 years).
Investing in the future is a tricky business, investing in the next Playstation is a 'no brainer.'
The very small print disclaimer: I am not responsible if you lose your house, job, wife etc or worse still if you go bald. If you decide to remortgage your house and invest in Sony you do it of your own freewill however if you make any profits I want a 10% cut.
nondescript
Regular
Panajev2001a said:
Haha, you called me out. I haven't read Dante since high school, but yes, I was referring to the philosophers in the seventh (pretty sure its seventh)circle of hell. I thought that was the deepest level of hell. Obviously Dante did not send all philosophers to hell.
Panajev2001a said:
Cool down, I agree with you.
Sony consumes so many chips, and since they demand the best process techniques, its only logical that they move R&D of critical components in-house. To do otherwise would place their product timeline at substantial risk.
I was simply pointing out that the Sony execs clearly disagree with DGMA and Co.'s bleak assessment. And between internet forumites and managers of billion-dollar companies, I tend to give more weight to the latter.[/quote]
Panajev2001a
Veteran
Philosophers in the 7th circle of Hell... I will get back to you on that one.
The great philosophers like Aristotle, Plato, etc... are outside hell... they are in an area just before it.
They are subject to no punishment other than not being able to stay with God.
Also, do not worry... I was not angry at you, but I was just stating my point... sorry if I seemed to be jumping on your back, it was not meant to be that kind of a post.
The great philosophers like Aristotle, Plato, etc... are outside hell... they are in an area just before it.
They are subject to no punishment other than not being able to stay with God.
Also, do not worry... I was not angry at you, but I was just stating my point... sorry if I seemed to be jumping on your back, it was not meant to be that kind of a post.
marconelly! said:
non need to get the xbox and GC into the equation. business is not about how much units you sell or how much more you sell with respect to the competition. It is about how much profit you make. If ps3 sells as much as the ps2 but costs (RD, fabs, etc) much more, end profits will be lower. You can have business when one competitor kills the competition and dies after that because of the amount of money he lost in the process.
Pana : i agree that Sony is doing what they NEED to do to survive. It is just that there is no proof that they will succeed (or fail). It is a very risky period for Sony.
The problem is that Sony's margins are a disgrace. The game business isn't doing as well as you could reasonably expect looking at Sony's dominance in the market. PS3 will be a significantly more expensive product than the PS2, both in R&D and production. If Sony "only" does as well with PS3 as it did with PS2 profits will be a lot lower or even non-existant. As far as Cell having other uses let's wait and see about that. It's not the first we've heard that kind of talk from Sony.
Panajev2001a
Veteran
I think they have a very good chance of survival ( they are not panicking and cutting R&D even where it is needed ): they are doing exactly what they needed to do in a long while, which is restructure and optimize the parts of the group that were inefficient and losing money left and right ( like Sony Electronics and Sony Music ) this assuring thatb their main Semiconductor-heavy division was not deprived of the funding it needed.
Sony is indeed restructuring its whole Semiconductor business and it finally understood it is key to have high technology in that field for a comoany like Sony: that can lead to cheaper ( to manufacture ) monitors, cheaper Walkmans, cheaper DVD players, cheaper Blu-Ray players, cheaper Stereos while mantaing a high technological edge over competitors.
The key of restructuring is to take away from all the sub-divisions their local Semiconductor R&D ( in most companies it was basically competing with other sub-divisions and at the end of the day, judging how few ICs [~20%] are made in-house, they were pretty inefficient ) and they consolidated together: I will let you guess what sub-division seems to be on top of the Semiconductor food chain in the new consolidated scheme
It is the one who is making the PSP
SCE has made a lot of money with PSOne and PlayStation 2: you cannot fault Ken Kutaragi for Sony Electronics and other sub-divisions spending that profit left and right.
SCE is not losing money, even taking into account the profits margin drop: they are still in the black even with all the R&D investments they made.
The game business is not doing bad, it is difficult without a price cut, considering how fast PlayStation 2 has sold in the previous year's quarter due to a price cut, to sell the same amount of units.
The year is ot over though and they can tank in more profits with the Holidays coming up.
A good reason of the profit margins being so thin is that they are putting in advance PlayStation 3 R&D into the books: would you prefer to see high profit margins for SCE till 2005 then to see SCE dropping so far down in the Red to casue a shockwave between investors ?
Maybe you would, but I will give you the benefit of doubt cybamerc... even if you have not wasted once occasion to troll Sony in a long while.
CELL will have other uses ( else Sony corp. would have not granted SCE this kind of budget ), but what is most important is that the fabs which SCE will build ( 2 new ones: nagasaki #1 and Oita #2 [the latter one in conjunction with Toshiba] ) will not used only for SCE products, but they are part of the plan to increaae by a good amount the per year the percentage of in-house fabbed ICs ( which is again fundamental to a recovery for Sony in the long run )..
This is important because fabs are a very important key of the equation, not to say that they are also a very expensive part of the equation as well.
Sony is indeed restructuring its whole Semiconductor business and it finally understood it is key to have high technology in that field for a comoany like Sony: that can lead to cheaper ( to manufacture ) monitors, cheaper Walkmans, cheaper DVD players, cheaper Blu-Ray players, cheaper Stereos while mantaing a high technological edge over competitors.
The key of restructuring is to take away from all the sub-divisions their local Semiconductor R&D ( in most companies it was basically competing with other sub-divisions and at the end of the day, judging how few ICs [~20%] are made in-house, they were pretty inefficient ) and they consolidated together: I will let you guess what sub-division seems to be on top of the Semiconductor food chain in the new consolidated scheme
It is the one who is making the PSP
SCE has made a lot of money with PSOne and PlayStation 2: you cannot fault Ken Kutaragi for Sony Electronics and other sub-divisions spending that profit left and right.
SCE is not losing money, even taking into account the profits margin drop: they are still in the black even with all the R&D investments they made.
The game business is not doing bad, it is difficult without a price cut, considering how fast PlayStation 2 has sold in the previous year's quarter due to a price cut, to sell the same amount of units.
The year is ot over though and they can tank in more profits with the Holidays coming up.
A good reason of the profit margins being so thin is that they are putting in advance PlayStation 3 R&D into the books: would you prefer to see high profit margins for SCE till 2005 then to see SCE dropping so far down in the Red to casue a shockwave between investors ?
Maybe you would, but I will give you the benefit of doubt cybamerc... even if you have not wasted once occasion to troll Sony in a long while.
CELL will have other uses ( else Sony corp. would have not granted SCE this kind of budget ), but what is most important is that the fabs which SCE will build ( 2 new ones: nagasaki #1 and Oita #2 [the latter one in conjunction with Toshiba] ) will not used only for SCE products, but they are part of the plan to increaae by a good amount the per year the percentage of in-house fabbed ICs ( which is again fundamental to a recovery for Sony in the long run )..
This is important because fabs are a very important key of the equation, not to say that they are also a very expensive part of the equation as well.
