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Kasz216 on 22 May 2013
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Michael-5 said:
Kasz216 said:
Michael-5 said:
MoHasanie said:
Wh1pL4shL1ve_007 said:

I dont really get why Sony stock jumped either (Blu-ray???)



The shares are up because there are rumors that they are going to spin off or sell a stake in their very profitable entertainment division, and then use that cash gained to help their struggling electronics division. Nothing to do with Xbox One. 

Yea, but did X-Box One have no influence at all?

Why is Sony selling their more profitable division? I'm very confused at that. They keep selling, and selling, and selling, and soon there will be nothing left.

1) Yes Xbox One had no influence at all.

2) Spin-off not fully sell.  It's be like Sony Financial Group.  Which sony still owns 60% of.

 

Basically they'd sell 20-40% of the company.  Still maintain control over it... and get a huge influx of cash of people wanting to buy into sony entertainment because they'd expect sony entertainments stock to rise. 

 

You'd do this in hopes that the extra money would allow Sony to make the next big hit Electronics product.  Since the downsides are relativily minor.


Though you'd only want that if you had faith in Sony's electronics division.  Otherwise it's just wasted money.

Oh, I see, so Sony would still have complete control in decisions made by their entertainment buisness, but they have immediate cash now for PS4 dev.

However if their entertainment division is the most profitable, wouldn't 20-40% of future profits be given to new partial owners? This seems like a short term benefit, but a long term hinerance (unless PS4 really takes off because of it).

Still, Microsofts stock did fall by 0.7% or so right? How small is Microsoft's Gaming Division to their Windows Division? I think there was a small drop on MS, and a small boost to Sony because of X-Box One, but like Talal said, there is no way to know for sure.

Not at all.

I mean think about it.  Do Sony's stockholders now get a percentage of Sony's profits?  Only when the company decides to pay a divdend... and even then it's far smaller then the percentage of profit the Sony made.

 

The New owners would only get money from profits whenever the board of Sony Entertainment decided to pay out dividends.   A board that would be dominated by Sony Executives because Sony would still own majority control.

So why would people buy?   Because Sony Entertainment is hugely profitable, so you could expect their stock to climb.

It's like Berskshire Hathoway.  They don't pay a dividend at all, yet their investors are more then happy to buy, because the value of their stock increases... so when they sell, they'll realize huge profits.  Meanwhile Warren Buffet gets to keep all of the profits inside the company which they use to buy other companies. (Replace by other companies with expand operations, R&D etc.  Stuff sony does.)

In general diverse companies are at a discount because they are more complicated... and therefore a certain level of uncertainty depresses their stock price.  So a spinoff could be expected to raise both companies stock.  (Hence why the stock boosted, despite it being on news sony might be getting rid of one of it's best pieces.)

 

The Downside is that Sony won't be able to use SCE to mask Entertainments awful performance as much... and it won't easy to shift Sony Entertainment money to Sony Electronics stuff since they will be essentially different companies. 

Ironically people on the chartz seem to have this backwords.  If you have faith in Sony... and that they can turn their electronics division around you should be FOR the spinoff.    If you think Sony electronics is going to flounder for a long time or is ultimatly doomed, you would want to be against the spinoff so sony has more coverage while their electronics division shrinks and they try and expand other buisnesses.