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bumidan on 08 July 2008
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Plaupius said:
bumidan said:
For Sony Q1 2008 end Jun 30, 2008, I am predicting a range of $50(*) million loss to $15(*) million profit on slightly different assumptions.

Still based on a $150(*) net loss per unit on the PS3, taking into account PS2 sales decline, PSP sales increases and PS3 sales increases.

For what it's worth, I think you should assign a certain percentage of the turnover to other costs such as marketing and maintaining the PSN/Home infrastructure, that way you might get improved results from the analysis. IMO, since Sony has stated that they are striving for cost reductions on the PS3 to stop bleeding money, 150$ net loss per console feels a bit high, I'd imagine it's hard to cut that much costs at this stage of the life cycle of the console, especially without expecting major increases in quantities. So I'd be interested to see what are the results of your analysis if you allocate, say, 18% of the turnover to other costs. If you want to go further, you can make some assumptions as to how that 18% is divided between the platforms, but since the 18% figure is pure speculation (though not really that unrealistic, at least it shouldn't be too high) it might just create more uncertainty that it would add to the analysis.

 

1. If I assign percentages for other costs, then that would imply I would have to figure out actual revenue for the divisions as well, not just operating income.  It could be done, but that would entail even more assumptions and frankly while doable, will take much more time.

2. Also, for next quarters projection - $150(*) does sound a bit high if you go by PS3 hardware costs alone.  But if you also take into account all other costs, it does not seem so high anymore.  At 2.5 million PS3 units projected to be sold for the quarter, that amounts to ONLY $375 (*) million. 

Which if by all accounts, component costs have been reduced to about break even on the PS3 hardware, still leaves a lot of expenses (losses) to be allocated - overhead, marketing, distribution, etc.

If you feel that the actual component costs of PS3 hardware is about $400(*) per unit, then another $375(*) million allocated to operate the actual hardware division is not too much of a stretch.

Does that answer make sense?  The main point is that if PS3 Hardware component costs is about break even, there are still a lot of costs that has to be deducted - hence a LOSS for the PS3 hardware division still.

What do you think?