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Slimebeast on 17 January 2009
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NJ5 said:
Slimebeast said:

 

 I think it's too narrow minded to just look at a company's economics as a whole and currency levels.

Often companies in trouble drop the prices of their product to be able to compete, take marketshare and be profitable in the long run. Ford and AMD come to mind just from the top of my head.

To drop the price of the PS3 is part of a much bigger strategy.

Actually I believe that Sony as a whole will drop prices of most of their electronics products, to be able to compete with Samsung etc.

Instead the cost reductions will be by laying off factory workers, re-structuring the organization and whatnot.

I'm 100% sure the PS3 will drop by Spring.

 

Sony's problem is that they are offering "premium" products that people aren't as interested in as in the past. "Brand" ain't as much of a huge thing anymore. If Sony ain't dropping and adapting to the market, they will look even more as a "premium" brand and thus will be stuck in a corner and keep shrinking. I dont beleive they will chose that path.

 

Those cost cutting measures you mentioned only take effect about a year after they're launched... A rule of thumb is that when a company lays off workers to save $1 billion a year, they will spend around $1 billion in that year in severance pay and restructuring costs... The way Sony is bleeding cash, they could well run out after a year or two, so I don't think the decision of cutting prices is as automatic as some people are suggesting.

Last year, I was having similar arguments with some people. I saw Sony telling investors that they're not going to cut PS3 prices until SCE is profitable and I based my prediction of "no price cut in 2008" on that. I was right that time, so I think I'm going with the same strategy now.

 

 

 Yeah, restructuring and cutting measures don't have immediate effect, I know that.

But I serously believe that cash won't be a big problem for Sony. It hasn't even been a big problem for AMD despite losses for years. Yes, the shareholders are pissed off by the losses, but somehow AMD always have managed to get more loans and investments for their big development projects and for building new fabs.

Sony is much healthier than you (and others) portray. One or two years of losses (especially in economic turmoil) is normal for companies.

IMO Sony only has a little image problem, they're slightly too much of a premium brand for being such a huge company. But with strict cost cutting (lay offs preferably in the Japanese factories) and re-structuring (maybe drop one business segment or two, say laptops or memory production, I dunno) and they'll be able to compete soon.