Sony Year-end/4Q Financials

[Carl B]

Sony's year-end earnings have come out; this will be the quick/dirty version vs the more in-depth stuff of usual, but in dollars the net loss was $439M. Operating income was a positive $342M for the year. Currency exchange rates of course wreaked their usual havoc, and I am sure we can all understand where it's not just dollar/yen anymore, but Euro/yen that is also a headache lately.

They expect to be profitable next year on a net basis, with a lot of current expense and future savings both tied up in the conclusion of their restructuring plan.

On the 'Network Devices' front, the business lost $893M, due to losses in game ultimately. These are better numbers than last year, but only marginally. PS3 has improved, but the decline in PS2 is taking out more margins than the PS3 improvement is contributing. I'll probably listen to the conference call later and glean all those details we are usually interested in. Vaio sales are also down some, and of course currency drama. Walkman improved some.

13M PS3's, 9.9M PSP's, 7.3M PS2's. 195.7M units total brand software. For the coming year Sony is predicting 15M PS3's, 8M PSP's, and 6M PS2's.

http://www.sony.net/SonyInfo/IR/financial/fr/viewer/09q4/

http://www.sony.net/SonyInfo/IR/financial/fr/09q4_sony.pdf

 

[Rangers]

I dont understand how game is losing so much if we keep hearing how profitable PS3 hardware is on the verge of becoming, seemingly constantly.

Some of it is likely PSN though, I did come across a writeup of a conference call where they said they needed to improve PSN profitability. I'm sure the pay PSN is unveiled at E3.

15m PS3 forecast is quite powerful.

 

[NavNucST3]

I was wrong about them hitting the 13M, though part of me wonders if that number might change in next quarters financials. Their like competitor should be concerned given PS3 software sales and the rapid hardware gap decline. Though the like competitor is most certainly happy about being in the black.

EDIT: It is time (hopefully this was done awhile ago) for some soul searching with respect to the PSP

 

[obonicus]

15M is pretty aggressive; isn't it awfully close to Nintendo's prediction for next year?

Maybe it means a price cut? Sony's 13M seemed ridiculous when they announced it pre-price cut.

 

[boommoob1]

15M is pretty aggressive; isn't it awfully close to Nintendo's prediction for next year?

Maybe it means a price cut? Sony's 13M seemed ridiculous when they announced it pre-price cut.

I dont think it sounded ridiculous at all. It's always been obvious it's problem has been price. I think the 15m prediction indicates no pricecut or at best a $50 cut. With only 2 quarters at the $299 price and shortages this year they still hit their 13m. A full year at the $299 pricepoint and a seemingly very powerful software lineup i think 15m seems a pretty safe bet.

 

[Lucid_Dreamer]

15M is pretty aggressive; isn't it awfully close to Nintendo's prediction for next year?

Maybe it means a price cut? Sony's 13M seemed ridiculous when they announced it pre-price cut.

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.

 

[deepbrown]

I dont understand how game is losing so much if we keep hearing how profitable PS3 hardware is on the verge of becoming, seemingly constantly.

Some of it is likely PSN though, I did come across a writeup of a conference call where they said they needed to improve PSN profitability. I'm sure the pay PSN is unveiled at E3.

15m PS3 forecast is quite powerful.

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.

 

[Carl B]

Deepbrown where are these conjectures coming from? Vaio has often been a decent margin business for Sony, rather than lossy. Also I don't think we can assume that PS3 makes money per unit just because there was further cost-reduction.

 

[deepbrown]

Deepbrown where are these conjectures coming from? Vaio has often been a decent margin business for Sony, rather than lossy. Also I don't think we can assume that PS3 makes money per unit just because there was further cost-reduction.

No, it was announced by Sony in the calls. It's not losing money since March.

Oh and the losses for the games business for the year were around -$500million USD.

Edit: sorry, thought Viao was losing money. Something's losing money other than the games business that's for sure.

 

[Carl B]

No, it was announced by Sony in the calls. It's not losing money since March.

Well, that works for me. Listening to the call now though to see what's up.

 

[Shifty Geezer]

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?

 

[deepbrown]

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?

As I said, the loss quarters were the first two. The first two they were selling the fat PS3 - the PS3 Slim wasn't even on the market until the third quarter. Pretty easy to understand. Plus they must have lost loads selling the fat PS3's for $299. The second two quarters were profitable. The PS3 was only profitable in hardware from March 2010 (two months ago...presumably linked to the 40nm console)

 

[Carl B]

I would assume that the majority of the division losses came from the first two quarters as well.

Anyway I listened to the call, and at 1:04 they get a little more explicit with what's going on in terms of costs/expenses. PS3 is indeed "non-lossy" at this point... but I'm not going to give it any better than that myself, because anyone can look around at what's going on with exchange rates right now and realize that it is going to be tough for Japanese companies unless things improve/stabilize ASAP.

PSN is lossy; they are looking to change that this year. Their content sales on the platform fell a little short of expectations. I'm sure the content itself is massively profitable, but there is the infrastructure upkeep as well as an overhang there.

PSP was around 10M vs 15M original estimate... my guess is that there are a lot of unsold PSP Go's hanging around, and IMO that has probably been an expensive, ill-advised foray.

They 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.

 

[patsu]

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?

Cost too high, development cost for future stuff, network infrastructure, ...

I think network infrastructure and operation may have moved to another division with their strange reorg in April.
How's their VAIO and eBook doing ?

 

[Shifty Geezer]

Cost too high, development cost for future stuff, network infrastructure, ...

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?

 

[patsu]

They will have to figure out a way to make more money from the expensive network infrastructure and operation. Moving it to the Sony Group level will blow up the cost even more, but also offer more avenues to make money, and enjoy better economy of scale.

I believe their Bravia Internet Video just sign up one new channel with a classical orchestra. They should be able to serve the same content to all Bravia TV, Sony network players, Walkman, VAIO or even future eBook readers.

 

[Carl B]

Well, the next year should be profitable in that respect simply because those first two quarters of massive losses will be absent on the same order that they were present in the year gone by. That said, I don't think PS3 will ever be riding the margin coattails that the PS2 offered up, so I will be surprised if we ever see a $1B+ profit year for gaming.

 

[patsu]

That's quite true. Let's see how their PSP2 hold up.

 

[Shifty Geezer]

That said, I don't think PS3 will ever be riding the margin coattails that the PS2 offered up...

The hardware, no. But with all the added download revenue streams...I mean, this was the dream! A box in everyone's house where they access all their entertainments, with the platform holder getting a slice for every game, movie, TV series, etc. Are these aspects just too small to be providing returns, or have the running costs consumed all the profits from content sales?

 

[patsu]

Well, my question is whether Sony needs to open up its Sony Online Services for other manufacturers' hardware, like an independent network business. Or should it stay Sony only.

Judging by the name, it looks like Sony only; but you never know. ^_^