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Giggs_11 on 31 October 2014
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czecherychestnut said:
Maraccuda said:
I cant make heads or tails of the graphs but it is definitely a 1 billion USD loss? Not good at all. They really need to axe phones sooner than later.


The thing that most people seem to be missing is that 99% of that loss is a one-off writeoff of goodwill, ie the assessed value of the business (in this case the Sony mobile brand). MC made an operating profit (barely, but a profit), but they assessed that the value of the Sony brand for mobiles was 176 billion yen lower than it had been before. This is partly due to smaller market share (smaller market share typically reduces the strength of a brand and hence its worth) and due to the way that the goodwill had been calculated when Sony bought out Ericsson's share of Sony Ericsson. In fact, they reduced their assessed goodwill to zero, meaning that they assess the Sony mobile brand has having no value. 

Without the writedown in goodwill, Sony would have posted a ~ 90 billion yen profit (~ $US800 million) for the quarter. Yeah, Sony aren't healthy, but the underlying business performance is on the way up, they just need to get through the restructuring and re-evaluating of their business. 

To give people an analogy, imagine that you get your house assessed by a real estate agent and he says your house is worth $300k. Three years later, you ask a real estate agent again what its worth and he says that because the market is down and you've got some dodgy neighbours its now worth $250k. If you were a business, in that year you would record a $50k writedown. If your income that year was $40k, as a business you'd say you lost $10k because your net worth decreased by that amount. Of course, good will can also go up, so the opposite can also occur. An appreciable amount of Apple's profit in the mid 00's was due to large increases in the goodwill of the Apple brand. 

It's still a loss... Goodwill exists for a reason, and if there really was that write-off in goodwill you're saying than that means the company was overvalued before...