amirnetz said:
You really need to get your numbers right. The problem with gaming is that it is small in sales but huge in loses. Let's look at the cold hard numbers of Gaming vs Electronics in Q2 2008 (the last reported quarter): Sony's Total Sales = $19.9B, Total Profit = 106M Electronics Division: Sales = $15.9B, Profit = $727M Game Division: Sales = $2.6B, Loss = $379M So the "increadibly small piece of the Sony pie" is eating away HALF the profits of the Electronics division which is responsible for 80% of the company's revenue. Just imagine that Sony shuts down the gaming division all together. The revenue will go down by 13% but the profits will increase by 370%. Not a bad trade-off! "But... but... but... you are just showing a bad quarter to make your point" you must be thinking. Well let's look back... in Q2 of 2007 Sony's losses from the gaming division where more than double those of Q2 2008 (almost 1.5 times worst). So 2008 is actually a major improvement over 2007. The gaming division is not "increadibly small piece of the Sony pie". it is a major drag on the performance of the whole company. The fact that the total revenue of the division is so small makes things even worst for the gaming division. When such a small business unit has such an adverse result on the big company shareholders, analysts and management are all asking: "is it worth it? will it ever pay for itself? can we really afford such a luxery of a business that is losing so much money?" Everyone is going to look for positive signs in the next financial reports. Competitively, the writing is already on the wall - Sony will not be a dominant player this generation, no matter what they do. Now all is left is to see if there is hope to actually make money even without dominance - something that Sony never had to do before. If the gaming division will fail to show that they are well on track to profitability then some significant action will be forced on it. Source: http://www.sony.net/SonyInfo/IR/financial/fr/08q2_sony.pdf |
All indications are, based on data provided, the gaming division to return to profitability between Q3 FY08 and sometime in FY09. Positive sales growth in the division and continued drastic decline in operating loss attributed to PS3 and PSP sales and decreased PS3 production costs. Though the division is still small within the company it is experiencing the largest growth in the company. Falling software sales attributed to fall in PS2.
So based on that entire report the gaming division is relatively a small portion of total company. It is operating at a loss but experiencing the largest growth in the company and has improved 59.2% Y-O-Y. Growth in division attributed to increased PS3 and PSP hardware sales and increase in PS3 and PSP software sales. Sales of PS2 hardware and software fell Y-O-Y due to falling interest and support. Based on the report linked by you there is little reason to cut a positive growth segment of a company with profitability possible Y-O-Y. There is likely to be restructuring to reduce costs more which might include restructuring production process and a redistribution of resources currently in the decreasing areas of the sector( PS2 hardware and software cuts). So a small portion of a company with the largest growth most certainly is a major drag on the company. Lets talk about the segments with Y-O-Y decline shall we.
