Sony May See 50% Profit Drop
Analysts predict massive drop in third quarter thanks to PS3
Sony may well report a 50% drop in profits (globally) for the third quarter of 2006 when it reports earnings tomorrow, according to Bloomberg. The figure comes from a survey of five analysts who attribute the possible drop predominantly to the PS3's performance.
As this is based on a survey of analysts carried out by Bloomberg, the report is filled with ‘probablys’, ‘mays’ and ‘could bes’; that said, it still makes intriguing reading.
Losses from the games division have probably driven net income down from a record breaking 169.9-billion yen (£705.4-million) at the same time last year to 84.1-billion yen (£352.7-million). Turnover,however, is probably around three-trillion yen, a rise of 9.2%.
Also contributing to the possible loss is the huge recall on laptop batteries that Sony had to make last year.
So, what do those nasty little numbers mean? In a nutshell Sony's rise in turnover is being offset by huge development (and marketing) costs for the PS3. The predicted 50% drop in profits looks alarming on paper it's largely to be expected during the first quarter of a new console's lifespan. Especially when the quarter it's being compared to is a record-breaker for the company.
Over the course of this fiscal year Sony will probably lose a record 191-billion yen on games. This compares to an 8.7-billion yen profit last fiscal year.
Mitsushige Akino, who looks after $468 million in assets at Ichiyoshi Investment Management in Japan, said "A drop in third-quarter results is largely expected on the games division. There's no surprise unless the company further reduces its profit forecasts." However, Akino won't be advising his investors to buy stock in Sony until the company improves earnings.
Over the full year Sony as a whole may still exceed its profit targets thanks to a weaker yen, television sales and growth in its movie unit.
So, what does this mean for the PlayStation 3? Frankly, not a vast amount more than it did about a week ago. Battery disasters aside, Sony was always going to have been aware that in launch year, the cost of getting the PS3 to market was going to impact its financials.
Source: Bloomberg
As this is based on a survey of analysts carried out by Bloomberg, the report is filled with ‘probablys’, ‘mays’ and ‘could bes’; that said, it still makes intriguing reading.
Losses from the games division have probably driven net income down from a record breaking 169.9-billion yen (£705.4-million) at the same time last year to 84.1-billion yen (£352.7-million). Turnover,however, is probably around three-trillion yen, a rise of 9.2%.
Also contributing to the possible loss is the huge recall on laptop batteries that Sony had to make last year.
So, what do those nasty little numbers mean? In a nutshell Sony's rise in turnover is being offset by huge development (and marketing) costs for the PS3. The predicted 50% drop in profits looks alarming on paper it's largely to be expected during the first quarter of a new console's lifespan. Especially when the quarter it's being compared to is a record-breaker for the company.
Over the course of this fiscal year Sony will probably lose a record 191-billion yen on games. This compares to an 8.7-billion yen profit last fiscal year.
Mitsushige Akino, who looks after $468 million in assets at Ichiyoshi Investment Management in Japan, said "A drop in third-quarter results is largely expected on the games division. There's no surprise unless the company further reduces its profit forecasts." However, Akino won't be advising his investors to buy stock in Sony until the company improves earnings.
Over the full year Sony as a whole may still exceed its profit targets thanks to a weaker yen, television sales and growth in its movie unit.
So, what does this mean for the PlayStation 3? Frankly, not a vast amount more than it did about a week ago. Battery disasters aside, Sony was always going to have been aware that in launch year, the cost of getting the PS3 to market was going to impact its financials.
Source: Bloomberg
Companies:
Sony
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Comments
YenRug 30 Jan 2007 13:39
1/5
Not forgetting that each PS3 sold is done so at a loss to Sony, as they try to establish the system as a viable one.
TimSpong 30 Jan 2007 15:16
2/5
YenRug wrote:
Not forgetting that each PS3 sold is done so at a loss to Sony, as they try to establish the system as a viable one.
Not forgetting that iSupply is claiming that every PS3 is sold at a loss.
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DoctorDee 30 Jan 2007 16:04
3/5
Tim Smith wrote:
Not forgetting that iSupply is claiming that every PS3 is sold at a loss.
I don't think there is any doubt that Sony is losing money on each PS3 sold. But I do not think the amount lost is anywhere near what iSuppli claims. Their component prices seem to be WAY over what Sony would pay when buying millions at a time. iSuppli also ascribes over $200 of costs to manufacturing, and I've seen American manufacturing bosses say they could do it for FAR less than that in the US, and the fact that you can buy a DVD player in Asda for £19 indicates that manufacturing can be done profitably for pounds.
YenRug 30 Jan 2007 16:49
4/5
Tim Smith wrote:
YenRug wrote:
Not forgetting that each PS3 sold is done so at a loss to Sony, as they try to establish the system as a viable one.
Not forgetting that iSupply is claiming that every PS3 is sold at a loss.
Hmmm, so let me get this right: Sony are going on about how their $600 PS3 is a cheaper way of getting a Blu-ray player, than a $1000 standalone Blu-ray player; yet it has all the extra added functionality of a videogame system, including WiFi, Bluetooth, HDD and the Cell CPU. The point of the PS3 is that it's a trojan horse, trying to sneak Blu-ray in through the backdoor.
And you still think that people are only claiming that it's sold at a loss. Tell me, what's the weather like on Mars?
YenRug 30 Jan 2007 16:52
5/5
DoctorDee wrote:
you can buy a DVD player in Asda for £19 indicates that manufacturing can be done profitably for pounds.
Apparently they're going to be selling one for £9, soon; yes, you will soon be able to buy a player for about half the RRP of the discs you play in it!