What could Microsoft do to beat Sony in Japan next gen?

Dodece

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Dodece on 15 December 2012

Once again we return to the subject of Sony's finances. Sony's current market cap is about eleven billion dollars, and you can argue that the company is worth more then that or less then that. Sony can value its assets as it sees fit, but the market doesn't have to see it that way. The market decides what the true value of those assets are. Microsoft could make a offer of fifteen billion dollars for the company, and then the investors could decide to accept what is being offered, or they could decline.

Given how willing Microsoft was to walk away from Yahoo. Investors would probably pounce on such a offer as it would mean that the value of their stock would increase by over thirty percent. While declining could actually cause the stock to lose even more value. Even hard bargaining could drive away the prospective buyer. Sony isn't in a good bargaining position. Anything reasonably higher then the current market cap would be pretty hard to walk away from. Especially since the future of the company is fairly uncertain.

That said such a move would be foolish on the part of Microsoft. The reality is that Sony is losing money, because it is a bad product. It makes sense to buy good companies, or companies that stand to have good future growth prospects. What doesn't make sense is to buy a company that is losing money, and is buried up to its eyeballs in debt that the buyer would have to pay back.

That leads us to the most likely scenario for Microsoft beating Sony in Japan. Sony could end up conceding their home market, because they have to focus their comparatively meager resources on markets that offer greater profit potentials. Japan accounts for less then fifteen percent of the global console market, and North America alone is three times larger as far as hardware is concerned then Japan.

That is less of a problem for Microsoft. They can adequately play the entire field. Unchecked Sony's momentum might allow them to slide in Japan without actually aggressively courting that audience, but Nintendo is a home town team, and Microsoft would definitely use such a apathy to their advantage. I mean if Sony isn't aggressively courting domestic developers. You can bet Microsoft would be more then happy to take up all of that slack.

That brings up a good question. How much effort does Sony need to expend to keep their position in this market, and don't tell me no effort at all. Outright neglect would have a truly disastrous impact on the public perception. It is kind of the reverse of the main question, but it does matter for this discussion.

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fillet

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fillet on 16 December 2012

Turkish said:

fillet said:

czecherychestnut said:

man-bear-pig said:

Turkish said:
Sadly, there is nothing they could do, nothing.

What if they buy Sony and cancel the PS4?

If MS wants to go bankrupt they could buy out Sony just to cancel PS4.

Buying Sony wouldn't make MS go bankrupt. They've got $70bn in cash and make $5bn in profit every quarter...

Anyway, your original statement it wrong because if MS did this they they would beat Sony in Japan.

Sony and its assets are worth more than 70bn

Source?

Microsoft could buy a majority shareholding in Sony for $6bn

http://finance.yahoo.com/q/bs?s=SNE+Balance+Sheet&annual

More than $160bn

If MS wanna go bankrupt, they should buy out Sony

....I think you missed the $136,000,000 Billion in liabilities ;)

lol.

You also missed that not all of those "assets" are transferable so aren't valued as part of the company in the context of valuing the company's worth.

So yes, approx $5 Billion, give or take $5 Billion, about right.

Whats your point? If Sony were to be taken over, the liabilities disappear? What?

No.

What's YOUR point. You just said Sony was worth more than 160 Billion dollars. When valuing a company, you deduct the liabilities of the company from it's value.

When buying a company and making an offer, you offer what the company is valued at, it goes without saying that you still have to take on the debt/liability once you have taken over the company.

If that really needs saying then I will not converse with you further on the matter except to say that you learn that kind of thing in the first lesson in business studies.

Buying a company doesn't make its liabilities disappear, where did you hear that from. Its not just assets-liabilities=lets buy this company lol

Actually it is. That's how Harmonix was sold by MTV for $50, or the old Japanese developer Jaleco, sold for $2.

You are both kinda wrong, the value of a company is loosely its assets minus liabilities, however the price to actually buy it outright is its market value PLUS its liabilities, because as Turkish mentioned the liabilities don't just disappear when you buy a company, they just transfer. An example would be a house, if say my house is worth $350k but I owe $250k on it, you couldn't buy my house for $100k because the bank still expects to get its $250k back. If Sony is worth $6 billion on the share market, if you buy it you take on those liabilities, so the total price to you is still market value plus liabilities.

MS currently could afford to buy Sony based on market value (ie its share price * number of shares Sony has on the market) but then the problem is if Sony doesn't consent to be taken over MS has to do so in a hostile manner, by buying Sony shares as others sell them, and by doing so slowly accrueing an increasing share in Sony. The problem with a hostile takeover is as MS buys Sony shares the increased demand in Sony shares boosts the share price, costing MS an increasing amount to get, as Sony only has a set amount of shares available. A good example is when Porsche tried to take control of VW, but as they continued to buy VW shares the price kept going up (because you can only buy what people are prepared to sell) and eventually they took on so much debt trying to buy VW that they needed to be rescued (ironically by VW, which is why VW now own Porsche). Thats why hostile takeovers are difficult to do, and require massive amounts of capital (far higher than non-hostile takeovers). MS could probably do it, but its shareholders would be pissed as it would be a massive waste of money and would weaken MS considerably. Much better to wait until Sony is bankrupt and then buy the assets when its liquidatedand its assets are sold to pay off its liabilities (not saying that will happen) .

Anyway on topic, I don't think MS can do anything to win Japan, they tried buying exclusives this gen and it helped a tiny amount but not enough. Really I don't think they should care though, Japan is not that a big a market as it used to be, and they've shown this gen that you can still be successful without doing well in Japan.

Go back and read the bit Turkish was on about, go and read my post. Where did I say liabilities disappear!!!? That's downright ridiculous.

The basic argument was about Turkish saying Sony is worth 160 Billion dollars, it is not AFTER you deduct the liabilities, which you have to do to get the value of the company.

Is a company that has 1 Million dollars in assets but owes 100 million dollars in debt worth 1 Million dollars?

...(According to Turkish it is)

That's how he's come to the 160 Billion dollar number.....come on now, this is just embarrasing to read!

Thats right you never said that, I brought that up and you always ignored it. Suppose MS buys Sony, what happens with the liabilities? MS will be accounted for them. And as czecherchestnut pointed out with a very easy to follow example, MS can't buy Sony, for various reasons. If MS wants to put their whole company at risk just by taking over Sony, they should do it. One would wonder why they don't take over Activision, Nintendo, Google or other companies just because they're worth less.

That is a good point, in some respects. But those liabilities don't suddenly all have to be paid off if a company is taken over either. So it's status quo. Would that be something Microsoft *could* do, yes. Is it something it would do realistically with a risk that wasn't too great....Not a chance in hell.

As you correctly point out, the liabilities aspect would be too much of an issue to take on.

However it kinda counteracts your original point that "Sony is worth 160 billion".

fillet

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fillet on 16 December 2012

Dodece said:
Once again we return to the subject of Sony's finances. Sony's current market cap is about eleven billion dollars, and you can argue that the company is worth more then that or less then that. Sony can value its assets as it sees fit, but the market doesn't have to see it that way. The market decides what the true value of those assets are. Microsoft could make a offer of fifteen billion dollars for the company, and then the investors could decide to accept what is being offered, or they could decline.

Given how willing Microsoft was to walk away from Yahoo. Investors would probably pounce on such a offer as it would mean that the value of their stock would increase by over thirty percent. While declining could actually cause the stock to lose even more value. Even hard bargaining could drive away the prospective buyer. Sony isn't in a good bargaining position. Anything reasonably higher then the current market cap would be pretty hard to walk away from. Especially since the future of the company is fairly uncertain.

That said such a move would be foolish on the part of Microsoft. The reality is that Sony is losing money, because it is a bad product. It makes sense to buy good companies, or companies that stand to have good future growth prospects. What doesn't make sense is to buy a company that is losing money, and is buried up to its eyeballs in debt that the buyer would have to pay back.

That leads us to the most likely scenario for Microsoft beating Sony in Japan. Sony could end up conceding their home market, because they have to focus their comparatively meager resources on markets that offer greater profit potentials. Japan accounts for less then fifteen percent of the global console market, and North America alone is three times larger as far as hardware is concerned then Japan.

That is less of a problem for Microsoft. They can adequately play the entire field. Unchecked Sony's momentum might allow them to slide in Japan without actually aggressively courting that audience, but Nintendo is a home town team, and Microsoft would definitely use such a apathy to their advantage. I mean if Sony isn't aggressively courting domestic developers. You can bet Microsoft would be more then happy to take up all of that slack.

That brings up a good question. How much effort does Sony need to expend to keep their position in this market, and don't tell me no effort at all. Outright neglect would have a truly disastrous impact on the public perception. It is kind of the reverse of the main question, but it does matter for this discussion.