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FishyJoe on 23 December 2008
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SlorgNet said:
TheSource said:

2) iSupply reported the figures in dollars, which is fine. But the dollar buys 30% fewer yen that last year. Sony is a company that operates in Yen. So the losses are likely bigger, because the PS3 components were bought en masse when a dollar bought more yen, but the product made for those components sells for less than 'the sum of its parts' even accounting for the expected loss.

3) iSupply does suck at predicting the future, but they do have a good track record in determing what it costs to make a product.

 

Sony is a multinational company and does NOT operate on yen. They restate their overall accounts in current yen for end-of-the-year reports, but that has nothing to do with daily operations. Their Euro biz accumulates euros, US biz dollars, etc. The PS3 is built mostly in China, with a few high-end designed in Japan, so the yuan-dollar-euro exchange rate is what matters. Thing is, the Wii and 360 are also built in China, so no company has any advantage over the others.

iSupply doesn't have any special insight into Sony's cost structure. They seem to be running down a vendor list and estimating individual parts, which misses (1) volume discounts and (2) Sony's internal cost reduction system, which is highly efficient.

 

They may be multi-national, but the yen is still going to cost them billions in earnings. Just about all the electronics they make are built in China, but even when you factor that in it's still going to cost billions because of the Yen. Read their Sony's earnings revision if you don't believe me.

According to their own estimates, the high Yen will cost 130 billion yen in earnings. And since this revision was made, the Dollar and Euro have drop significantly, so it will be much worse than this revision.

http://www.sony.net/SonyInfo/IR/financial/fr/08revision_sony.pdf

Due to a change in our assumptions for foreign currency exchange rates in the second half of the
fiscal year, as noted above, to reflect the significant appreciation of the yen above the rates
assumed in July, we expect our results to be lower than the July forecast with operating income
decreasing by approximately ¥130 billion, mainly within the Electronics and the Game segments
(assumed foreign currency exchange rates in July were approximately ¥105 to the U.S. dollar and
approximately ¥165 to the euro for the quarter ended September 30, 2008 and approximately
¥105 to the U.S. dollar and approximately ¥160 to the euro for the second half of the fiscal year).