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PS3 forecasts: Setting the record straight, wondering about their Q2 report

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Unless I'm mistaken, that 11 million figure is never explicitly mentioned on the Q1 report, or at least they don't specifically say it's sold rather than shipped. All they say is "[their] forecast for the [fiscal year] is unchanged from the [previous] forecast". I'd say 11 million is with the previous counting method.

That means they expect 16.5 million shipped (as in warehouses) LTD in March 2008, and say nothing about sold (as in retail). They may still meet it, but only with some 4-5 million units in inventory, and another 1-2 million or so lying around somewhere - they already had 2 million in inventory this March, so that's not unbelievable. Also, that might explain the PS2 and PSP disparity, as they're may not want be willing to build inventory on those.


Reality has a Nintendo bias.
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libellule said:
I dont see why u say it is impossible.

8M consoles in 9 months ? why not ?

same for the shippements...

who knows which production level they can reach ?

It doesn't make fiscal sense for Sony. Sony takes a loss on each PS3 they manufacture, over producing only costs them to lose even more money when there is a price reduction. For example the majority of the 60GB PS3's that are now selling for $499 cost Sony over $800 to manufacture. Sony is constantly looking for ways to reduce the PS3's cost. Stocking up on PS3's that they are taking a loss on is to their detriment. It puts them in bad predicament of keeping the MSRP high until they clear out the older inventory or reducing th price and taking even bigger losses on each unit sold. 



KruzeS said:
That means they expect 16.5 million shipped (as in warehouses) LTD in March 2008, and say nothing about sold (as in retail). They may still meet it, but only with some 4-5 million units in inventory, and another 1-2 million or so lying around somewhere - they already had 2 million in inventory this March, so that's not unbelievable. Also, that might explain the PS2 and PSP disparity, as they're may not want be willing to build inventory on those.

Except, as NJ5 pointed out, their manufacturing is down.  If they averaged 370K per month, we wonder whether they slowed their manufacturing or temporarily halted it.

Either way, Sony needs to have a feasible plan and really believe they're going to ship 11 million units in the fiscal year.  If they do not have a feasible plan for doing so and if it would be now impossible for them to manufacture sufficient units or they obviously do not intend to, then they are willfully misleading investors which is a serious problem.

I certainly wonder what they have up their sleeves.  Personally, I hope they sell enough to ship 11 million units.  It looksl impossible, though.  If I were to make estimates, I'd have 6 million units for the top end of their range in fiscal '08.



ioi said:
Awesome work NJ5 and spot on.

We should do a quarterly analysis like this at each interval so people can see exactly how many units are where. Interesting that retailer units have decreased a little (they order less to sell what they have) and you are right about there being no way Sony can hit their targets which does raise legal and moral issues of exactly what can you report as a forecast? You could say 20 million, ship 5 million and just say you missed the forecast - by then most people have read the 20 million forecast and made business decisions on it.

Again, nice thread and hopefully the definitive and last one we will have on the subject.

 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.



Emmitt2222 said:
ioi said:
Awesome work NJ5 and spot on.

We should do a quarterly analysis like this at each interval so people can see exactly how many units are where. Interesting that retailer units have decreased a little (they order less to sell what they have) and you are right about there being no way Sony can hit their targets which does raise legal and moral issues of exactly what can you report as a forecast? You could say 20 million, ship 5 million and just say you missed the forecast - by then most people have read the 20 million forecast and made business decisions on it.

Again, nice thread and hopefully the definitive and last one we will have on the subject.

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.


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.



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KruzeS said:
Unless I'm mistaken, that 11 million figure is never explicitly mentioned on the Q1 report, or at least they don't specifically say it's sold rather than shipped. All they say is "[their] forecast for the [fiscal year] is unchanged from the [previous] forecast". I'd say 11 million is with the previous counting method.

That means they expect 16.5 million shipped (as in warehouses) LTD in March 2008, and say nothing about sold (as in retail). They may still meet it, but only with some 4-5 million units in inventory, and another 1-2 million or so lying around somewhere - they already had 2 million in inventory this March, so that's not unbelievable. Also, that might explain the PS2 and PSP disparity, as they're may not want be willing to build inventory on those.


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.



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NJ5 said:

We just changed the shipping information from the production basis to the shipping basis starting from this quarter. -- Nobuyuki Oneda


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."



TheBigFatJ said:
NJ5 said:

We just changed the shipping information from the production basis to the shipping basis starting from this quarter. -- Nobuyuki Oneda


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.


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).

 



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NJ5 said:

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?

 



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