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Sony FY 2008 Q2 Results Analysis SONY BLEEDING LOOKING BAD

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DMeisterJ said:
You can add me Squillies!

DMeisterJ.

 

 My heart is healed!



Tease.

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I think the even more troubling part is the rest of Sony outside the gaming unit is going to be hit very hard. That means now more than ever they can't take much loss in the gaming unit.



you're right fishyjoe.
though m doing my part.

got a bravia 46" lcd, with bdps350 blu ray player, with ps3 with a sony receiver/speaker thingy for the bravia....



FishyJoe said:
I think the even more troubling part is the rest of Sony outside the gaming unit is going to be hit very hard. That means now more than ever they can't take much loss in the gaming unit.

who knows?

It is possible that sony may end up like Lehman Brothers :)

 



FishyJoe said:
I think the even more troubling part is the rest of Sony outside the gaming unit is going to be hit very hard. That means now more than ever they can't take much loss in the gaming unit.

Bingo...you can't spend as much on R&D, while Nintendo and M$ are swimming in cash for R&D for this gen and the next gen consoles.



"...You can't kill ideas with a sword, and you can't sink belief structures with a broadside. You defeat them by making them change..."

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bumidan said:
the big thing is the structural deficit.

lets pretend they produced a blockbuster game that quarter.

So if all our assumptions are relatively "correct", then if they produced a hit like MGS4 (1st party), then:

Sales = 4 million units
Assume profit is greater coz it is 1st party = $5 per unit (instead of $2)

then that is still only $20 million, out of a loss of almost $400 million

Lets even pretend they made HALO 3 in that quarter.
According to MSFT - Halo 3 earned REVENUES of $330 million.

EVEN IF (VERY BIG IF) they made a NET PROFIT OF $50 million on Halo 3, then IT STILL DOESN'T PUT A DENT in that LOSS.

So even if they keep producing a Halo 3 1st party BLOCKBUSTER every quarter, they lose money.
Again, note that last quarter Sony made money.
And HOPEFULLY in the Holiday quarter, they will also make money.

But PS2 is basically dying, PSP is not selling any software (where the high margins) are.
PS3 is selling decent software and hardware

But the division is still BLEEDING money...
so there must be some sort of structual problems, because it is now 2 years in.

that is assuming the PS3 is almost BREAKING EVEN on hardware already....

A couple of things. With a longer development cycle they have deferred a lot of their software revenue to the end of this year and the start of next year.

You can also assume they recieve a recenue of about ~$38 per 1st party game vs ~$6 for a third party game. The other figures already include development cost, but if the expenses are already accounted for then any profit they make on them has to be applied back to previous expenses.

For example if Killzone 2 costs $50,000,000 to develop and another $30,000,000 to market, test and publish the game then they would need to sell a little over 2,000,000 copies just to break even, except you would have to take the opportunity cost over those years of just keeping the money in the bank so the real break even point because it took 3+ years to develop (10% net increase in money from interest) would be 2.3 Million unit sales at full price.

If we expect a reasonable rate of returns of 30% then Sony would be expecting $114 million in revenue to make up for games which don't break even etc and still give them an overall profit they would need to sell 3,000,000 copies.

 



Tease.

Things do not look good....



4 ≈ One

The real serious problem they face this quarter is the Yen. It crept into the equation last quarter for the last month which they stated, but it has gotten much much worse since then. The strength of it over these last two months has been something else. With the WW economy in a serious downturn Sony faces selling less product while getting even less back due to the Yen. This will reach far into there earnings and not simply the gaming division.



Yes, the yen is a factor.
but for this quarter ending sep 08 , the comparison is between a 115 vs 104 yen only.



It's not only the yen though. Consumer electronics in general is taking a beating.