| drkohler said: I am not going to write a 500 page dissertation about those points, only a few things concerning your answer: 1. "Explain why one of them matters and the other one doesn't." I never wrote that at all and it is a completely ludicruous statement. Manufacturing costs is what a company has to pay for its product when it's in the production cycle - be that manufactured by itself or a contractor. Now, before you can manufacture a product, you have the full cycle of marketing research, development stages, testing stages etc. All this adds to the price of a product, since you as the producer have to cough up that money before you sold your first item - also you still have all your engineers to feed even if the product design is finished (which, in the industry, never happens anyway). 2. The list of components is easy to get (also you can actually _look_ at the main board and write down a component list -the chip descriptions are not milled.). How do I "invent" my price estimates? ($840 for 1st generation, $620 for 2nd generation, $350-$400 for 3-4fth generation units. Note how the first two numbers are pretty identical to numbers given by most analysts so my assumptions are not totally wrong right from the start). As with every estimate, one has to make certain assumptions, my key assumption is that Sony Gameing division had a $3 billion setup cost for the PS3 which they wanted to regain with their first 10 million units in two production runs of roughly 5 million units each. Now obviously noone outside Sony knows about the contracts Sony has with its suppliers or Sony's plans to regain development costs, so one has to estimate standard values for components, amortisation times, and procedures as they exist in the industry. Granted it has been a long time since I designed computer components myself (on a much smaller scale than we write here and we are talking Nec7220, Hitachi HD61480 etc), but the industry has not changed systematically in the past 30 years, only the manufacturing has changed ("just in time" is one of the buzzwords here. Somewhere there is an older post in the forum where I explained the costs of some parts a little in detail, but I'm too lazy to search it for you). And yes, in the past 30 years, I had worked in many projects and had been in direct contact with companies large and small that produce industrial goods (or sometimes produce machines that produce industrial goods - I have actually seen prototypes of blu-ray discs in research labs before most of our readers have even heard about something now called blu-ray). When you work in projects in such surroundings, you also get to see some of the financial decisions behind them. (And you always have to sign so-alled "nondisclose agreements" which prevent you from telling anyone what you have seen or you go bankrupt pretty fast). 3. I can walk into major and minor Swiss, French and German stores within an hour or two and simply write down the prices for the various consoles.. and I have colleagues in other countries that do the same thing in their hometurfs. So there is no secret procedure to get sale values.. As an example for Switzerland, the tax is 9.3%, so subtract roughly $60 from every bundle and you get around $560 for the PS3 before taxes. That's still far away from $350-$400 Sony coughs up upfront. And dealer margins are pretty low for this kind of electronic goods (I think there are older posts that say some US distributors actually have a zero margin on the hardware - something that no distributor in Europe would accept). 4. I'm not going there. If you don't want to understand my previous posts that try to figure explain Sony losses even in last fiscal quarter, that's ok with me. Also I never wrote about the whole sottfware issue because I have no clue there. This could have been/still is an equal money sink as the hardware unit. |
Thank you for your explanations, although regarding the most important point (number 2) a lot of doubts remain, of course.
Regarding number 4, you misunderstood (or didn't see) Sony's actual declarations. They didn't say they'd break even on the games division, they said they'd break even on a per-hardware-unit cost.
Look here:
(...)
And then, on the PS3, can you discuss where the cost down reduction is going? It took production cost at launch to where it is today. What has been the per-unit reduction you have been able to achieve?
Nobuyuki Oneda - Executive Vice President and Chief Financial Officer
(...)
Dan, your second question, PS3 cost update, since the introduction the cost has drastically decreased. How much I cannot disclose it. However, we can expect that sometime in late fiscal year '08, the cost to be equal to the selling price. Currently, the cost is higher than the price, but toward the second half the fiscal year '08 we could catch up.
If you were right and the current manufacturing cost was $350, I don't see why they'd think they'd only start breaking even on hardware towards the end of fiscal 2008 (meaning more than 6 months from now, potentially almost 9 months).
My Mario Kart Wii friend code: 2707-1866-0957
