Sony FY 2007 Q3 Financials

[one]

http://www.sony.net/SonyInfo/IR/financial/fr/index.html
http://www.sony.net/SonyInfo/IR/financial/fr/07q3_sony.pdf (pdf)
http://www.sony.net/SonyInfo/IR/financial/fr/viewer/07q3/ (html)
http://www.irwebcasting.com/080131/10/index.html (webcast)
http://media.corporate-ir.net/media_files/nys/SNE/custom/1.31.08/1-31-08.htm (conference call)

It's back in black. But the PS3 shipment forecast for the FY 2007 is 9.5 million units now, 1.5 million units down from the old one.

 

[Rangers]

Well at first I was, and still am, supremely impressed at the game divisions ability to turn a profit.

But you dig a bit deeper and it's still likely PS3 is still losing a lot of money.

We have 60m units PS2 soft, 26m units PS3 soft, 18m units PSP soft, 5.4m PS2 hard, 5.7m units PSP hard. All those imo should be highly profitable. The only one even arguable is PSP hardware. Personally I think still at 169 and being out so long, PSP hardware is likely profitable. The way I calculate, PS2 soft may net Sony $5 per unit because much of it may be discounted so 60mX$5=$300m. PS3 soft figure 10 per, $10X26m=$260m, PSP soft $5 per, $5X18m=$90m, PS2 hard $20 per, $20X5.4m= $108m, total profit from non PS3 hardware= $758m. So in that case given total game divison profit ~$150m PS3 hardware would lose ~600m on 5m units or $120 per unit.

The one thing I'd wonder is if my profit per game calculations at 5 and 10 dollars may be way off. Anybody have an idea how much the platform holder sees per third party game? And of course 1st party as well?

Basically you see just how much advantage PS2 is for them.

Also, I think the average selling price of the PS3 is still around $450, because the 80GB seems to outsell the 40GB. That helps a lot. It probably also explains why Sony is planning on keeping a higher priced sku around.

Sony sure gives a lot more info than MS. Does MS give this type of info? Anybody have any idea how much 360 soft sold last Q for instance?

We also learn PS3 outsold 360 last quarter. Sony now reports near sell through I believe. So it's 4.9m versus I think 4.3 360. Not too surpring though given Japan. It mean 360's current sales lead in USA is roughly canceled out in europe , and the extra 500k or so PS3 went to Japan.

 

[betan]

IIRC, they also reported a write back last quarter covering the price cut on produced SKUs w/ GS, still impressive though.

Also, reported cost of 40GB is around $400 now, so they probably won't see loss again any time soon (unlike what we have seen in the case of Xbox), especially with a new overpriced SKU.

 

[one]

But you dig a bit deeper and it's still likely PS3 is still losing a ton of money.

We have 60m units PS2 soft, 26m units PS3 soft, 18m units PSP soft, 5.4m PS2 hard, 5.7m units PSP hard. All those imo should be highly profitable. The only one even arguable is PSP hardware. Personally I think still at 169 and being out so long, PSP hardware is likely profitable. The way I calculate, PS2 soft may net Sony $5 per unit because much of it may be discounted so 60mX$5=$300m. PS3 soft figure 10 per, $10X26m=$260m, PSP soft $5 per, $5X18m=$90m, PS2 hard $20 per, $20X5.4m= $108m, total profit from non PS3 hardware= $758m. So in that case given total game divison profit ~$150m PS3 hardware would lose ~600m on 5m units or $120 per unit.

If you include R&D cost for software / hardware, and PSN operation cost, it seems the PS3 hardware itself is at a favorable point from now on.

The correction of the shipment forecast may reflect the release dates for GTA4 and GT5P both of which are in the FY2008 Q1 now. So my previous guesswork about a price cut also slides down to April. Some concrete plans for PSN and such will be announced at a press conference in the next month.

 

[Rangers]

I strongly doubt PS3 hardware is profitable guys. You can believe the $400 report if you want but the evidence doesn't back it.

The fact is they recorded only a small profit on a lot of PS2 and PSP sales, basically. It doesn't take a rocket scientist to discover there is a significant drain somewhere which is PS3 hardware.

 

[Platon]

Impressive with the game division being in black so fast. On the other hand I agree with Rangers, there must be draining going on somewhere. With all that stuff they sell if it would be at pure profit or breaking even in some of those they should have made more money, so most likely the PS3 still costs them some money...

 

[Mr. Domino]

Hmm,

Calendar year 2007

Unit sales of Hardware (Unit: million)

PS3 8.83


8.83 million, and I think they sold about 2 million by the end of 2006? I supose they sold around 11.5 million units until now then?

 

[Arwin]

I strongly doubt PS3 hardware is profitable guys. You can believe the $400 report if you want but the evidence doesn't back it.

The fact is they recorded only a small profit on a lot of PS2 and PSP sales, basically. It doesn't take a rocket scientist to discover there is a significant drain somewhere which is PS3 hardware.

What the report says, is that the PS3 cost has been reduced, and that the PSP hardware makes a profit. It does not say anywhere that right now the PS3 is cost neutral or is making a profit. If it did, it's not like they are going to (or are even allowed to) lie about that in these reports or anything, surely.

So yeah, clearly the PS3 hardware wasn't making a profit in Q3.

EDIT: end of 2006 was more like 500.000, they had some major supply issues.

 

[betan]

I strongly doubt PS3 hardware is profitable guys. You can believe the $400 report if you want but the evidence doesn't back it.

The fact is they recorded only a small profit on a lot of PS2 and PSP sales, basically. It doesn't take a rocket scientist to discover there is a significant drain somewhere which is PS3 hardware.

And I'm saying it was even bigger than your estimation once you include the writeback.
However $400 production is more recent.
IIRC, even white PS3s have different motherboards than black 40GBs.
Whether $400 is accurate or not, your calculation doesn't reflect much on the 40GBs yet alone newest iteration.

(Plus $400 for 40GB doesn't make it profitable)

 

[Titanio]

It's amazing how dramatic the PS3 turnaround has been in such a short time. I remember quietly thinking, pre-pricecut, as late as last September and October, that PS3 was going to get chewed alive that holiday season. Even with the price-cut, I thought it would just soften the gap between itself and 360.

It's also impressive to see their financials recover, even with what was probably a very painful series of PS3 price cuts.

 

[djskribbles]

Hmm,

Calendar year 2007

Unit sales of Hardware (Unit: million)

PS3 8.83


8.83 million, and I think they sold about 2 million by the end of 2006? I supose they sold around 11.5 million units until now then?

i think those are shipped/sold to retailers... tallying up the NPD and MC numbers, and estimating sales in PAL land, i'm estimating they were around 9m by the end of 07. but when they said their goal was 11m by March 08, i'm guessing they meant shipped/sold to retailers. so i think they're well on their way to their goal.

 

[Titanio]

i think those are shipped/sold to retailers... tallying up the NPD and MC numbers, and estimating sales in PAL land, i'm estimating they were around 9m by the end of 07. but when they said their goal was 11m by March 08, i'm guessing they meant shipped/sold to retailers. so i think they're well on their way to their goal.

11m was their FY goal, not LTD. They've actually cut that FY goal to 9.5m now (they're currently around 7m).

 

[djskribbles]

oh
that makes more sense. :smile:

 

[Laa-Yosh]

Even with the price-cut, I thought it would just soften the gap between itself and 360.

Which is what it did, right? AFAIK MS has increased its lead a little in numbers (although the market share difference will obviously keep on sinking).

 

[Titanio]

Which is what it did, right? AFAIK MS has increased its lead a little in numbers (although the market share difference will obviously keep on sinking).

I meant ongoing gap in sales, not overall, LTD gap. The ongoing gap swung in PS3's favour a little looking at these numbers, and MS's, in Q4. To make my point clearer, even with the pricecut, I was expecting 360 to still outsell the PS3 by a fair margin over the holiday quarter.

As for whether MS increased its lead at all in 07, its debateable. In 07, combining NPD and Media Create, MS gained about 1m. But judging by the numbers Sony reports here, and has reported in the past in Europe, Europe could have quite easily made up for that. It's hard to be sure, but I'd say at the very least, if MS did increase the LTD gap in 07, it was by a very small amount indeed.

 

[Nesh]

http://www.siliconvalley.com/latestheadlines/ci_8126588

 

[Rangers]

http://www.varietyasiaonline.com/content/view/5413/1/

Sony is "still losing money on each units sold, but we are continually reducing the loss and hope to reach the break-even sometime next year," Sony CFO Nobuyuki Oneda said at a Thursday press conference. For the fourth quarter, however, Oneda sees a slowdown in inventory reduction. "It might be difficult to make a profit (in games) for the next quarter."

So does he mean next fiscal year I assume? So sometime in the next 15 calender months?

 

[Titanio]

http://www.varietyasiaonline.com/content/view/5413/1/



So does he mean next fiscal year I assume? So sometime in the next 15 calender months?

I would say so. Kaz has alluded to that timeframe also..although he was also talking about next year for any profitability in the games unit at all. But I guess he's thinking of the full year..SCE will still post a loss for the whole year, despite this quarter, and may even post a loss in the next quarter. I guess FY08 is when they're hoping for more stable profitability, and PS3 profit.

 

[Carl B]

I would say so. Kaz has alluded to that timeframe also..although he was also talking about next year for any profitability in the games unit at all. But I guess he's thinking of the full year..SCE will still post a loss for the whole year, despite this quarter, and may even post a loss in the next quarter. I guess FY08 is when they're hoping for more stable profitability, and PS3 profit.

Exactly. People don't let yourselves be tripped up by dates and such; next fiscal year is their target for divisional profitability. Obviously this quarter is nice, but a profit of ~$117 million isn't going to undue the previous losses in Q1 or Q2 by any stretch. So... for next year full division profitability (but that still doesn't mean every quarter per se), and a hopeful break-even on PS3 manufacturing costs.

 

[Arwin]

It will be interesting to see whether in this competitive market they will be able to lower the manufacturing price faster than the consumer price. I wouldn't personally want to count on that until they go sub 299 with both.

Of course, the software side of things is a completely different matter. Overall, I think they will be making a decent profit in 2008 in the game division, with the PSP about to receive a couple of boosts (God of War 2, Crisis Core, Skype/Go!Messenger, etc.), the PS2 still not dead (it looks unlikely to die for another two years), and the PS3 getting a whole bunch of big titles soon with MGS4, GT5 Prologue, and then later also LBP, etc. And if Home fares well, I think all three will post healthy (software and hardware combined) profits in FY08. PS3 by itself though will have some work to do towards earning back that initial investment.