Sony Shares Slide on Analyst Unease on PlayStation 3 Manufacturing
Unspecified component issues spark downgrade.
Sony shareholders will no doubt be feeling frustration and annoyance today as they watch over 3% slashed from the value of the company following a reduction in confidence from Japanese brokerage Mitsubishi UFJ Securities, whose analysts advised Sony Corp shares be lowered in rating from three to two.
Mitsubishi UFJ Securities stated it expected sales of PlayStation 3 in launch year to be 50% of previously published projections, stating that rather than six million units shipped in year one, it expected Sony to sell only three million. Mitsubishi UFJ Securities analyst Masahiko Ishino said, "In the medium term this would mean that it would take longer for Sony to recover its huge investment in PS3 and thus we are downgrading the stock." Sony's shares lost 3.2% trading at 5,080 yen as a result of the move.
Sony had been preparing the markets to suffer severe losses as it funds frantic R&D and sets in motion what many see as its most important project to date. Sony Corp, parent of SCE, has lost momentum in some of its traditional fields of dominance. It remains the global leader in videogame hardware and software sales. Indeed, Sony stated in April that its game division would rack up an operating loss of 100 billion yen ($860 million) this business year.
Shareholders in Sony must feel frustrated with analyst's somewhat 'short-termist' approach to a business lifecycle which relies on hardware becoming established in the marketplace before it reaches profitability, a lifecycle that has remained unchanged since the release of the very first games machines.
Mitsubishi UFJ Securities stated it expected sales of PlayStation 3 in launch year to be 50% of previously published projections, stating that rather than six million units shipped in year one, it expected Sony to sell only three million. Mitsubishi UFJ Securities analyst Masahiko Ishino said, "In the medium term this would mean that it would take longer for Sony to recover its huge investment in PS3 and thus we are downgrading the stock." Sony's shares lost 3.2% trading at 5,080 yen as a result of the move.
Sony had been preparing the markets to suffer severe losses as it funds frantic R&D and sets in motion what many see as its most important project to date. Sony Corp, parent of SCE, has lost momentum in some of its traditional fields of dominance. It remains the global leader in videogame hardware and software sales. Indeed, Sony stated in April that its game division would rack up an operating loss of 100 billion yen ($860 million) this business year.
Shareholders in Sony must feel frustrated with analyst's somewhat 'short-termist' approach to a business lifecycle which relies on hardware becoming established in the marketplace before it reaches profitability, a lifecycle that has remained unchanged since the release of the very first games machines.
Companies:
Sony
Read More Like This
Comments
MrPure 25 Aug 2006 15:25
1/2
Shareholders of the software developing companies will be upset as well considering software will not being selling as much with a smaller installed base.
tt_rage 25 Aug 2006 20:36
2/2
Shareholders in Sony must feel frustrated with analyst's somewhat 'short-termist' approach to a business lifecycle which relies on hardware becoming established in the marketplace before it reaches profitability.
The title (and the tone) of the article suggests analysts are uneasy about the PS3's manufacturing problems, *not* Sony's approach to the business lifecycle.
It's not the slow-burning market base that's prompted the share-price drop, but rather lack of confidence that the consoles are going to be available for sale in the first place.
If the future marketing plan (and therefore future profit predictions) are based on initial sales projections that are (in the analysts' opinions) overoptimistic, those analysts are going to be cagey about buying the company's shares.
There. I've made the same point in three different ways.