Sony's PS3's losses widening, will BD studio support help? - AVS Forum
View Poll Results: Will Studio support for BD help Sony's PS3 achieve 07 profitability & sales targets?
Definitely Yes 37 15.48%
Marginally Yes 32 13.39%
Marginally No 17 7.11%
Definitely No 55 23.01%
Who cares, BD will win 15 6.28%
Who cares, HD DVD will win 37 15.48%
Irrelevant, Gamers will decide 46 19.25%
Multiple Choice Poll. Voters: 239. You may not vote on this poll

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Old 01-31-2007, 09:17 AM - Thread Starter
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Do you think that continued exclusive Blu Ray Studio support and large number of announced BD exclusive titles will help drive further Sony's PS3 sales (as *new* format buyers chose the PS3 as their BD player) and allow Sony's gaming division to achieve profitability and its sales targets for 2007

Quote:


Sony Games Division to Post Wider Loss Than Forecast -Bloomber News Story 2007-01-31

By Pavel Alpeyev
Sony Corp., the world's largest maker of video-game players, said losses at its PlayStation unit will exceed an October forecast of 200 billion yen ($1.6 billion) this fiscal year because of price cuts to fend off Nintendo Co.'s Wii.
The loss for the year ending March 31 will be less than 250 billion yen, Takao Yuhara, head of investor relations, told reporters in Tokyo today. The business will probably break even the following year, he said.
The comments reinforce concerns over Sony's flagship console, whose sales have lagged behind the Wii since the PlayStation 3's debut in November. Chief Executive Officer Howard Stringer has called the console one of Sony's ``champion products'' that will be an earnings driver for the electronics company.
The PlayStation 3 launch ``has turned out to be worse than even our pessimistic scenario,'' Merrill Lynch & Co. analyst Hitoshi Kuriyama wrote in a note yesterday. The console ``emerges as a key concern'' for earnings growth next year, said the Tokyo-based analyst, who recommends investors sell Sony shares.
Sony yesterday reported a 5.3 percent decline in third-quarter net income to 159.9 billion yen. The result was better than analysts estimated because a weaker yen and sales of Bravia flat-screen televisions helped offset the loss in games.
``We hope the PlayStation 3 business will turn to a profit in the fiscal second-half next year as initial costs will decrease,'' Chief Financial Officer Nobuyuki Oneda said yesterday.
Shares of Sony fell for a third day, declining 1.4 percent to close at 5,550 yen in Tokyo. The stock has gained 6.1 percent in the past six months, compared with the 13 percent gain by the Nikkei 225 Stock Average.

Games Earnings
The game division, Sony's second-largest by revenue, lost 54.2 billion yen in the quarter ended Dec. 31, compared with a profit of 67.8 billion yen a year earlier. Analysts predicted a loss of 50.9 billion yen.
Costs associated with the launch of the PlayStation 3, including air transportation expenses, and slower-than-expected sales of the PlayStation Portable were the main reasons for the loss, the company said yesterday.
Sony also had to cut the price of the PlayStation 3 in Japan after consumers there complained the player was too expensive compared with players from Nintendo and Microsoft Corp.
In the U.S. and Japan, Kyoto-based Nintendo's Wii is outselling the PlayStation 3 by about 2-to-1.
Kyoto-based Nintendo, the world's largest handheld game maker, last week reported profit in its latest quarter jumped 40 percent to 77.6 billion yen, fueled by demand for Wii consoles and portable DS game players.
Separately, prices of liquid-crystal display televisions will probably fall about 30 percent this year, same as the previous year, Yuhara said.


Story illustration: {6758 JP RV W } shows Sony's global competitors. See {6758 JP HCPI } for the company's historical percentage moves. Click on {6758 JP FA } for the company's earnings.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at +81-3-3201-2137 or palpeyev@bloomberg.net.

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Old 01-31-2007, 09:21 AM
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Sony are a very profitable company, don't let the shills on here fool you into believing otherwise.
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Old 01-31-2007, 09:23 AM
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BD studio support will have little to do with the dynamics that result in a profitable or lossy gaming division. I *do* think that that analysts sell recommendations are idiotic though, as next years earnings will be far above this years. Does he view Sony as the PS3 alone?

These guys just don't know what they're talking about, day in and day out.

PS - And for God's sake, this is another thread more appropriate for the gaming section. Not only is the topic not directly HD format related, it's in fact the converse. Here the entire focus is on whether Blu-ray can save the PS3, and not the other way around.
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Old 01-31-2007, 09:40 AM
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"Sony on Track After Reporting Fiscal Third-Quarter Results"

http://biz.yahoo.com/indie/070130/596_id.html?.v=1

"...

The PS3 rollout is on track and Sony's Blu Ray efforts, written off by Wall Street as the format war drags on, could still provide some upside for the company. At the same time, the PS3 rollout aside, the company's restructuring efforts are helping cut costs, paving the way for increased earnings power over the next several quarters.

..."
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Old 01-31-2007, 09:59 AM
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Third quarter profitably has nothing to do with BD or PS3 as both were introduced by Sony in the fourth quarter. Fourth quarter sales of the PS3 are slow due to supply issues. Every place that sells the PS3 locally is out. I have talked to the stores and they get a bunch every week but they sell out quickly. My impression is that BD and PS3 are going to be a fantastic winner.

Rick R
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Old 01-31-2007, 10:10 AM - Thread Starter
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Quote:
Originally Posted by xbdestroya View Post

PS - And for God's sake, this is another thread more appropriate for the gaming section. Not only is the topic not directly HD format related, it's in fact the converse. Here the entire focus is on whether Blu-ray can save the PS3, and not the other way around.

I keep reading many posts that exclusive Studio support for Blu Ray and the large number of Blu Ray titles being released soon will sway *new* buyer to chose the Blu Ray format and purchase the PS3 (which is the defacto mainstream / widely appraised and used BD player).

Hence the poll , will Blu Ray content help drive PS3 player sales?

Am editing the OP to word it so
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Old 01-31-2007, 10:13 AM
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Quote:
Originally Posted by xbdestroya View Post

BD studio support will have little to do with the dynamics that result in a profitable or lossy gaming division. I *do* think that that analysts sell recommendations are idiotic though, as next years earnings will be far above this years. Does he view Sony as the PS3 alone?

These guys just don't know what they're talking about, day in and day out.

Anyone expressing a "Sell" recommendation instead of a "Hold" is not on the long side of the stock.

Shorties getting burned is one of my favorite things to see. Let them burn.

Gary


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Old 01-31-2007, 10:15 AM
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Quote:
Originally Posted by Rick_R View Post

Third quarter profitably has nothing to do with BD or PS3 as both were introduced by Sony in the fourth quarter. Fourth quarter sales of the PS3 are slow due to supply issues. Every place that sells the PS3 locally is out. I have talked to the stores and they get a bunch every week but they sell out quickly. My impression is that BD and PS3 are going to be a fantastic winner.

Rick R

I think they were referring to Sony's FISCAL 3rd-quarter (their fiscal year ends in March). Thus, they are actually referring to calendar 4th-quarter, which is their fiscal 3rd-quarter, I believe.
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Old 01-31-2007, 10:22 AM - Thread Starter
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Quote:
Originally Posted by Ilka View Post

I think they were referring to Sony's FISCAL 3rd-quarter (their fiscal year ends in March). Thus, they are actually referring to calendar 4th-quarter, which is their fiscal 3rd-quarter, I believe.

Yes, 2006 fiscal year ends 3/31/07 for most Japanese Co.

Sony's Q3 = our calendar Q4
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Old 01-31-2007, 10:28 AM
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Quote:
Originally Posted by dialog_gvf View Post

Anyone expressing a "Sell" recommendation instead of a "Hold" is not on the long side of the stock.

Shorties getting burned is one of my favorite things to see. Let them burn.

Gary

Good observation and good points.

I agree, I'm no fan of short-sellers.
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Old 01-31-2007, 10:32 AM
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Quote:
Originally Posted by Rick_R View Post

Third quarter profitably has nothing to do with BD or PS3 as both were introduced by Sony in the fourth quarter. Fourth quarter sales of the PS3 are slow due to supply issues. Every place that sells the PS3 locally is out. I have talked to the stores and they get a bunch every week but they sell out quickly. My impression is that BD and PS3 are going to be a fantastic winner.

Rick R


I disagree, I have been in several stores that have PS3s sitting on the shelve. Reason is probably because either price is too high for the general public and/or more people rather a Wii or 360. I have yet to find a store that has a Wii in stock yet. I feel the PS3 is another NeoGeo type of deal - great games and graphics - but price is too high for general public. $250 is a lot more palatable for a parent to shell out than $500-$600 (+$50 more for a game). Face it, most people aren't all that technical. Lots of parents will feel the two are similar and that the extra $300 - $400 is a complete waste of family funds.



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Old 01-31-2007, 11:34 AM
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Quote:
Originally Posted by Maxpower1987 View Post

Sony are a very profitable company, don't let the shills on here fool you into believing otherwise.

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Originally Posted by xbdestroya View Post

...next years earnings will be far above this years.

For all of you stating information like that above...and other "shorty" comments, stock value today has more to do with meeting projections than profitability. I've seen companies not post one cent of earnings, but because they lost half that of projections, the stock skyrockets. I've also seen stocks from well known, established companies make more than previously, revenue AND profit, but because they missed the projection by even one or two cents per share, the stock sinks. I'm not saying it is right or I agree with it...it is just the way it is now.

Also what is the basis for your statement for next years earning being "far above this years" ???

Here is a graph for you on Sony stock over the last 10 years:


Also, as far as this year going "as projected" for the PS3...remember projections have already been adjusted down (which is not a good thing) at least once, if not more than that. So when someone states "going as projected," I would submit it is compared to the already "downgraded" projections for the PS3.
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Old 01-31-2007, 11:43 AM
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Quote:
Originally Posted by Anamorphiac View Post

For all of you stating information like that above...and other "shorty" comments, stock value today has more to do with meeting projections than profitability. I've seen companies not post one cent of earnings, but because they lost half that of projections, the stock skyrockets. I've also seen stocks from well known, established companies make more than previously, revenue AND profit, but because they missed the projection by even one or two cents per share, the stock sinks. I'm not saying it is right or I agree with it...it is just the way it is now.

Also what is the basis for your statement for next years earning being "far above this years" ???

Here is a graph for you on Sony stock over the last 10 years:

You need to take a harder look at xbdestroya's chart, add up all of the numbers, and get a total in USD. I did it, the rough figure is about $2.4bn, which is in line with industry expectations. Next year (i.e. April 07 to March 08) Sony will do very well, the subsidy on the PS3 will decrease as they continue to lower costs, Bravias will continue to be worldwide market leader in TVs, SPE is putting out Spiderman 3 and Ghost Rider with a bunch of other movies that will inevitably do well, Sony Ericsson is looking to take the number 3 spot from Samsung, and Sony BMG will continue to bring home the bacon.

Your stock chart shows a general market trend more than anything else, in 2000 tech shares did well, and then they crashed and are still at that level, the only companies to gain in recent times are retailers, banks and Google/Apple, the first two funded by huge consumer credit due to historically low interest rates and inflation, and Google/Apple because they are cool!
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Old 01-31-2007, 11:52 AM
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@Anamorphiac: You're right that stocks tend to reflect expectations as much as they do reality, but in that sense Sony blew past expectations with this earnings report - don't you agree? Afterall, analyst consensus was for half this amount.

As for reduced future expectations, the only expectations that have been reduced are in terms of a slight loss widening in the gaming division for the present fiscal year. The strong performance in this quarter alone more than makes up for that from of a year-end outlook standpoint. Indeed, the year-end outlook has been raised significantly.

Going into fiscal 08, you have a movie division on a strong footing, a gaming division expected to break even by year end, an electronics segment in serious comeback mode, and joint-ventures that are making Sony money. What would this year have looked like earnings-wise without massive console launch losses, a nearly billion-dollar battery recall, and larger margins to boot? It would look a lot like next year is going to look.
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Old 01-31-2007, 12:13 PM
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Quote:
Originally Posted by xbdestroya View Post

@Anamorphiac: You're right that stocks tend to reflect expectations as much as they do reality, but in that sense Sony blew past expectations with this earnings report - don't you agree? Afterall, analyst consensus was for half this amount.

Well it depends on what "analyst consensus" and expectations we are talking about. Sony had severely lowered them at times (see links below)...so if you look at things against the lowered expectations, then yes they are better....better against the already lowered projections...not necessarily better than the beginning of the year forecasts:

http://www.sony.net/SonyInfo/IR/fina...ision_sony.pdf
http://www.igniq.com/2006/10/sony-pr...s-plummet.html
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Old 01-31-2007, 12:23 PM
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I think we can all understand where the previous estimates would have been lowered, it's stupid to say that the public hadn't reached that understanding long ago. Hint: battery recall.

When the consensus industry analyst opinion is for something, nothing else matters, in theory the market is now reflecting the current line of thinking. Your news links are from October - in financial terms they now have only historical value.

Sony had predicted a 130 billion yen net profit. Battery recall happens and PS3 launch expenses become more clearly understood, they drop it to 80 billion yen. So the market then expects 80 billion, and the stock reacts. Now, after the strong performance this quarter, they move the estimate back up to 110 billion.

*Any* investor worth his salt would see the underlying positive trends at Sony that go beyond the one time expenses being incurred this year. One need only read Sony's actual earnings report.
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Old 01-31-2007, 12:40 PM
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Any idea how much PS2 kept Sony's gaming division from going deeper in the red?

"We did not have business relations with that company, Fuh Yuan."
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Old 01-31-2007, 12:41 PM
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We can quote this stuff all day long and put our own spin on it...how about revenue UP nearly 10% but operating income DOWN nearly 15%...not quite the trend I (*Any*) would think promising as an investor.

And since I will assume you are not an investment analyst or advisor, I think I will look at it my way (and the way other investment analysits and advisors are looking at it.)

Oh, and as for the OP, IF studio support actually helps Sony obtain the monopoly on HD disc, then yes...it will help Sony. But I have NOT bought into the "more studio support guarantees Blu-ray the winner" argument. To my knowledge, nobody has surrendered and nobody has "crowned their a$$" ... so my personal answer is no, it will not help (since SD DVD is also a HUGE competitor to BD.)
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Old 01-31-2007, 01:29 PM
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Quote:
Originally Posted by GodWhomIsMike View Post

I disagree, I have been in several stores that have PS3s sitting on the shelve. Reason is probably because either price is too high for the general public and/or more people rather a Wii or 360. I have yet to find a store that has a Wii in stock yet. I feel the PS3 is another NeoGeo type of deal - great games and graphics - but price is too high for general public. $250 is a lot more palatable for a parent to shell out than $500-$600 (+$50 more for a game). Face it, most people aren't all that technical. Lots of parents will feel the two are similar and that the extra $300 - $400 is a complete waste of family funds.

I'm with you on this. It seems that the PS3 for the most part is available (bigger cities are probably the only exception). Amazon seems to sell out within a few days along with other online retailers (and I would hope so for Sony's sake, the console hasn't been out that long). Around here (St.Louis) the PS3 is available everywhere I go and has been for the last 3 weeks at least.

I know a person at the local Best Buy, they have plenty and haven't been selling all that well. I own a store in a mall here and talk to the EB Games manager and employees frequently, they aren't selling them. In fact, back during the holiday rush, they would have the 20gb models sitting around the store for days.

However, I have yet to see a Wii anywhere besides the demos. Those are still being sold by line tickets according to my Best Buy friend.

And to answer the OP's question: No and yes. But really, it's a question that doesn't mean a whole lot. Of course I think them having more studio support (which should eventually equal more titles available) will help, it almost has to on some level. But, the real question is, how much? Will it help enough to make much of a difference? I don't think so.

The PS3 is still looked at as a game system to the general population, and a really expensive one. In my opinion, the PS3 is going to take third in this generation of console wars. The 360 and Wii is where the real competition is going to be based on price and games. I read these predictions of the PS3 selling 20 million consoles within a year or two and I almost laugh. If the PS3 sells 20 million within 2 years, I'll eat my hat. I just don't see it at this price point, the price is going to have to drop drastically for that kind of adoption.. Though, as always, I could be wrong.
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Old 01-31-2007, 01:31 PM
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Quote:
Originally Posted by Anamorphiac View Post

We can quote this stuff all day long and put our own spin on it...how about revenue UP nearly 10% but operating income DOWN nearly 15%...not quite the trend I (*Any*) would think promising as an investor.

This is the easiest thing in the world to explain - for example, the gaming division's revenues are up, on sales of the very expensive PS3, but that same PS3 costs them more than they make on it, thus the income effects of that revenue are negative rather than positive. Gaming alone explains away your "flagged" divergence in revenue/profit.

Microsoft's own quarter resulted in record revenue, yet profits decreased. I'd love for you to start a thread on that; I have plenty to say on the matter, believe me.

I'm sure with some more studying of the facts you'd be aware opposite revenue growth and profit growth do not indicate a red flag long-term per se, such as in this instance, when margins are in fact improving in the core segments. And again, when you analyze where the profit growth has *been* this quarter at Sony, you'll see the trend is definitely positive, and the places where it has been negative, it is also largely temporary.



http://www.sony.net/SonyInfo/IR/fina...r/viewer/06q3/

Quote:


And since I will assume you are not an investment analyst or advisor, I think I will look at it my way (and the way other investment analysits and advisors are looking at it.)

Hey, go ahead. If Hitoshi Kuriyama's arguments make more sense to you, then all I can say is I'm not surprised. I could wish no other fortune upon you than you picking your stocks based on analysts recommendations - let's see where you come out of through that equation.
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Old 01-31-2007, 01:50 PM
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Quote:
Originally Posted by xbdestroya View Post

This is the easiest thing in the world to explain - for example, the gaming division's revenues are up, on sales of the very expensive PS3, but that same PS3 costs them more than they make, thus the income effects of that revenue are negative rather than positive.

Well as some in this thread have pointed out (your quote "Does he view Sony as the PS3 alone,) the PS3 is not all Sony does, so I would doubt with the limited supply of PS3's selling for the third quarter, this does not account for this entire swing of 10% gain in revenue with a 15% decline in operating profits on a consolidated statement. Not to mention, as others have in various areas...the profitable PS2 is still selling quite well and in these numbers also. Also, look at the financial services percentages and the all other percentages in the above numbers you have quoted.

Quote:
Originally Posted by xbdestroya View Post

Hey, go ahead. If Hitoshi Kuriyama's arguments make more sense to you, then all I can say is I'm not surprised. I could wish no other fortune upon you than you picking your stocks based on analysts recommendations - let's see where you come out of through that equation.

You will notice I mentioned "my way" AND analysts (I would guess you as well as other investors reading this look at facts your way & other's opinions...and those others are not average joe's working in non invesment related fields.) And yes, it has worked/is working out quite well for me...thanx...
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Old 01-31-2007, 01:58 PM
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Quote:
Originally Posted by Anamorphiac View Post

Well as some in this thread have pointed out (your quote "Does he view Sony as the PS3 alone,) the PS3 is not all Sony does, so I would doubt with the limited supply of PS3's selling for the third quarter, this does not account for this entire swing of 10% gain in revenue with a 15% decline in operating profits on a consolidated statement. Not to mention, as others have in various areas...the profitable PS2 is still selling quite well and in these numbers also.

I posted the actual numbers above - not sure if you saw that or not before you made you post - but in case you didn't you notice that gaming went from +68 to -54, or a total negative move of -122. Do the math on that, and I'm sure you'll see that gaming in fact accounts for well more than the 15% decline you're looking for. In fact, *because* it accounts for over 15%, it just further evidences how the positive growth elsewhere is otherwise obscured from the untrained eye.

Math is your friend Anamorphiac; don't be afraid to do some before making generalized claims. Reference the chart above.

Quote:
You will notice I mentioned "my way" AND analysts (I would guess you as well as other investors reading this look at facts your way & other's opinions...and those others are not average joe's working in non invesment related fields.) And yes, it has worked/is working out quite well for me...thanx...

Oh you are? Well I guess my first question would be: do you pick your own stocks, or do you listen to analysts? And since you are defending the profession either way, Goldman Sachs came out earlier this month and put a "buy" rating on Sony stock from a "hold"... so who's right? Merrill, or Goldman? One of them could be right, both could be wrong, but both can't be right. For my part, I honestly think I have better insights into it than both of them, so hey, I'll go with myself.
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Old 01-31-2007, 03:11 PM
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Of course studio support will help. Just as lack of studio support will hurt the competition.
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Old 01-31-2007, 04:17 PM
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The PS3 is supposed to be piggybacking off of gamers to become the trojan horse in the HD battle. If Sony is now hoping it is the other way around then they are in big trouble.

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Old 02-01-2007, 11:20 AM
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xbdestroya

I hope you are well aware that those number you see at sony site is in YEN not USD.

Here is the financial data as it appears in sony SEC filing for thier gaming division.

.........................2005........2006...Change.......2006
...................................................
in Yen
----------.......... ------........-----....------.......------
Sales and.............Y419.2.... Y442.8....+5.6%....$3,721
operating revenue
Operating income......67.8........(54.2)................(455)

the (455) is USD.

Do NOT let the magic smoke out because it is impossible to put the magic smoke back in!!!!
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Old 02-01-2007, 11:22 AM
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xbdestroya

I hope you are well aware that those number you see at sony site is in YEN not USD.

Here is the financial data as it appears in sony SEC filing for thier gaming division.

.........................2005........2006...Change.......2006
...................................................
in Yen
----------.......... ------........-----....------.......------
Sales and.............Y419.2.... Y442.8....+5.6%....$3,721
operating revenue
Operating income......67.8........(54.2)................(455)

the (455) is USD.

Of course it's in yen (billions); what's your point?
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Old 02-01-2007, 11:26 AM
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Originally Posted by xbdestroya View Post

Of course it's in yen (billions); what's your point?


simple

the price of the Yen is not steady as has to be accounted for during GMAPP

it also doesn't show the rest of the picture of when Sony sold assets (that is reported as a gain) or stakes in other ventures they had. Which accounted for nearly 4 billion USD loss in cash but 6 bill gain USD in assets.

Sony is not going anywhere as they still are sitting on 6 bil cash. but they could be sitting on 7 bill cash if not for thier gaming division

Do NOT let the magic smoke out because it is impossible to put the magic smoke back in!!!!
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Old 02-01-2007, 11:33 AM
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Figgie I really have no idea what you're talking about, but it doesn't seem to address any of the points I made in this thread. If you feel like doing that at any point, let me know.

We're not discussing balance sheets here, we're discussing net income trends. You'll see I address the gaming divisions losses several times throughout this thread. If you don't think the profit trend at Sony is extremely strong right now, I'd love to hear why. If however you rather discuss Sony's cash-position, I'm happy to do that too - but that has absolutely nothing to do with what was being discussed before.
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Old 02-01-2007, 11:36 AM
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I do believe the failure of the PS3 has been the only reason HD-DVD still has a shot. The more people that buy 360's...the more people that will be tempted with a cheap HD-DVD add on

Blue-Ray. I am not going to mispell the word blue because some sony exec wants to seem hip and push more units.
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Old 02-01-2007, 11:43 AM
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Originally Posted by xbdestroya View Post

Figgie I really have no idea what you're talking about, but it doesn't seem to address any of the points I made in this thread. If you feel like doing that at any point, let me know.

We're not discussing balance sheets here, we're discussing net income trends. You'll see I address the gaming divisions losses several times throughout this thread. If you don't think the profit trend at Sony is extremely strong right now, I'd love to hear why. If however you rather discuss Sony's cash-position, I'm happy to do that too - but that has absolutely nothing to do with what was being discussed before.


well extremly strong against what? last year?

not for anything but as it sits right now they are down 5.3% from last year so that would mean compared to last year, they are not strong at all. Unfortunatly, it WOULD have be an extremly strong year if thier gaming division did not post a 1 bill in the red and counting loss.

Do NOT let the magic smoke out because it is impossible to put the magic smoke back in!!!!
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