EA's Schofield hopes Sony can figure it out...

[NJ5]

libellule said:

NJ5 said:

"I'm really not sure what's going on with Sony," he said. "They've been such a great, great partner and PlayStation 2 being such a great machine that, God, I hope they get out of this and they figure it out and they're around for a long time."

(bolded part)

He's obviously talking about the possibility that Sony goes bankrupt, which is a real possibility given:

- how long the recession will last (notice it keeps getting longer and longer even according to the most optimistic analysts)
- Sony's finances (high debt, not much cash and currently losing a lot of money)
- Sony's low resistance to recessions

His point is that he hopes Sony can turn the company around into profitability before they run out of cash, which will be very hard for Sony to do.

 

 

do you really believe Sony is going bankrupt NJ5 ???

are now they have lost some money but is it really enought tokill them ???

I dont know why but I have the impression that their situatino is not so bad ...

Certainly what they have lost so far is not nearly enough to kill them. They still have more than enough cash to operate, I'd be very surprised if they don't last for at least for another 18 months (also, companies don't immediately die after going bankrupt). That said I'm not sure they'll go bankrupt. It's a real possibility, some analysts have said so and it makes a lot of sense.

Here is how things may play out in the next few months/years. Maybe not all of these things will happen, but some certainly will.

- Sony continues to restructure (which takes time and doesn't cause immediate cash savings, for example every laid off employee gets severance pay)

- Sony's cash reserves start to dwindle, getting closer and closer to the minimum operating level (if you've read articles about GM/Chrysler this expression pops up a lot).

- Sony gets further downgraded by credit ratings agencies, causing some of Sony's creditors to recall their loans. This means Sony needs more cash to pay them off, causing further problems (see AIG for an example).

- A lot of declarations from Sony's execs such as "this recession is very long and very deep, but we're doing what we can blah blah". More restructuring, more layoffs etc.

- Sony tries to sell some assets to other companies, which is made harder by the recession (other companies want to save money too, and aren't looking to expand). They manage to sell some assets, but usually at lower prices than their current value. Still, this buys them some time by increasing their cash reserves.

By the way this is not exclusive to Sony. The things listed above will happen to tons of companies in the near/medium term. Heck it's already happening to many medium companies, and some big ones as well.