Will PS3 have a successful year in 2009?

[NJ5]

Kantor said:
Even if Sony drops the PS3 early, they're not leaving the console market.

First, they won't drop it until 2010. Maybe 2011. Exclusives are coming out, they just spent god knows how much money developing Home (money sink. If they're losing money, they can't afford to waste on this stuff, no matter how cool it is).

After they do that, they will probably start work on the PS4. Sony knows how to win a gen. They've done it twice. Sony knows how to be profitable. They've done it three times. They just need to wipe the slate clean and start again much like the PS2- reasonably good hardware with killer software.

Of course, I think we're getting ahead of ourselves. Sony made a 500 million dollar profit last quarter, I don't think they're anywhere near bankruptcy.

I say if they did have to make cutbacks, Playstation would be one of the last to go. Sony Music Entertainment would probably be dumped first, followed by Sony Ericsson. But, like I said, that's only if things get extreme. This financial crisis will not last forever. It's not the Great Depression. Experts are saying it'll be over within 18 months.

And they've said from March next year, they will be more competitive with pricing. What can that mean other than a price cut?

Just take out some of the features. Like WLAN.

They're not near bankruptcy, that's for sure. They still have a cash horde of $12 billion. Their main problem, survivability-wise is really their low profit margin.

Their profit was actually $218 million in the last quarter, not $500 million, but that's not the issue here. The issue is that looking at profit as an absolute value is misleading, and it hides the fragility of these profits.

To put it simply, Sony was making around $1 dollar for each $100 worth of products they sold. Due to the dollar/euro collapse, they're now getting $80 for the same products they sell overseas, which would mean they'd be losing $19 dollars instead (or losing $4 billion instead of making $218m). This naive analysis is too pessimistic in some ways. The drop in the dollar/euro reduces a part their expenses (the part paid for in these currencies, such as European and American employees' salaries). There are also ways to insure against fluctuations in currencies, though they're only a partial protection. We'll only get the accurate picture in January when their next financial report comes out.

However, I can tell you that the naive analysis is surprisingly accurate when applied to the second quarter.

If the situation is even half as bad as the naive analysis makes it seem, that would already mean they'd have to do significant cuts in their business. Otherwise, their $12 billion in cash will quickly run out, and good luck trying to get loans in this environment. I see Sony in big trouble unless the dollar and euro recover significantly during the next year. If they do recover, a big part of their problems is gone.