ioi, I think from a legal standpoint what they are doing [or what they could do] is not considered illegal.  I don't know much about legal matters, but as long as there is information out there that people can use to base their investments on, then Sony can't be held liable.  If we at this website can put all of this together, then so can the investors if they care to. 

Ethically it's just a business move really.  It's skeezy, but permissable.  The reason why I wouldn't consider it totally unethical is because eventually Sony will have to take a hit from overestimating.  The bubble will eventually burst because there is no way to avoid it.  I think the more discrepency there is in forecasting to units sold, the more obvious it will be and more investors will get out early.  

In the end I think it will all work out to the way it should.  If you make a product that doesn't fit the market like you say it will, you take the hits while they come and give accurate estimates, or you hold off information as long as possible with the result being a huge crash that shakes both the financial and moral trust the public has in the company.  I think Sony is overestimating by a lot and they will get what's coming to them because there are checks and balances, those being us the consumers and shareholders who are knowledgable.  It won't be a huge crash, but in the end Sony is really only hurting themselves.

It is illegal for companies to intentionally misrepresent things or mislead investors. If Sony knows it cannot ship that many units, or if it is positioning itself to ship many fewer units (thereby proving its numbers aren't accurate), then it may be provable that it willfully mislead investors.  Console manufacture would be a very difficult business to mask -- people can look at reports, they can look at factories, they can look at records and they can say, "look, there was obviously no way you were going to hit these numbers when you issued this release."  Sony will likely have its butt covered one way or another.

Sony, of course, is a large multinational and I'm sure they have lawyers look at everything they send out. If they sent it out, they either believe that (1) the risk is worth it or (2) they have a plausable plan for doing this and will downward revise at the appropriate time. As long as it appears as though they're being as straight forward as possible they're fine.

I think you're probably wrong, since they said in their latest report that they're changing their method of counting shipped units. Saying "we changed our method" implies they'll count it in the new way from now on... Quote from the financial statement conference:

This is Nobuyuki Oneda. I will answer your questions. We just changed the shipping information from the production basis to the shipping basis starting from this quarter. The reason for this is that, after the last earnings call, we (inaudible) the media and the investors, that the production or shipment unit is not leading to our sales and (inaudible), sale’s amount, so it’s better to change from the production to the sale’s basis, [serene] basis. So that is the main ideas.

This effectively lowers their shipment estimates by approximately 2 million units. This says, "hey, the new way we're counting we shipped 3.6 million units in fiscal '07, not 5.5 million units. Don't worry, we don't need to change our forecast, though." Well, when you redefine the number you've shipped as 2 million less than you just announced, that's down-revising your forecast by two million units.

In the past, they were saying they expected to have 16.5 million total units shipped at the end of fiscal '08. With the new shipment counting method they expect to have 14.6 million total units shipped at the end of fiscal '08. This will likely be downward revised again next quarter.

A wise investor will look at Sony and say, "okay, they redefined what 'shipped' meant, and by this new definition they only shipped 3.6 million units last fiscal year but claim they will still ship 11 million this fiscal year.  So the total number of units they expect to ship dropped by 1.9 million units."

Precisely, isn't it funny? I didn't see any news article discussing this, probably because those numbers aren't trivial to get to (i.e. they weren't spoon fed to journalists by Sony).

I guess it would be more accurate to say that they redefined their terms such that they can say they shipped two million of the units they already claimed they shipped.  So the units they shipped last quarter will be shipped again this quarter.  Foolish investors will think Sony is getting a lot more success with the PS3 than they really are getting.

Just for completeness, let's think about the possibility that we're wrong and they do mean 11 million with the old counting method:

That would mean that the numbers they publish as shipments have nothing to do with their forecast, so the forecast can't be judged as accurate or not using the information they publish... What would they say in their fiscal reports, especially in their Q4 report then?

That's smart. Looks like they will produce more 80GB, than 60GB each quarter.

I'm sorry, but you probably are wrong.

You make a forecast saying you'll run 11 miles till the end of the month. The following week you say: "I'm going metric, but I still mantain my forecast". What does that mean? That you'll just run 11 km? No, because that would be changing your forecast. If all they say about the forecast is that they're keeping it, you can't just go and change the units.

But hey, think what you want. This is all just a ploy from Sony after all.