http://digg.com/gaming_news/Sony_set_to_report_massive_losses_due_to_PS3_failure

Sony May Post Biggest Loss in 4 Years on PlayStation 3 Consoles

By Hiroshi Suzuki

May 15 (Bloomberg) -- Sony Corp., the world's second-largest consumer electronics maker, may report its biggest quarterly loss in four years after the PlayStation 3 game console failed to spur as much demand as Nintendo Co.'s Wii player.

The net loss at Tokyo-based Sony may have widened to 75.8 billion yen ($630 million) in the fiscal fourth quarter ended March 31, from 66.5 billion yen a year earlier, according to the median estimate of 11 analysts surveyed by Bloomberg. Sales probably rose 9.5 percent to 2.02 trillion yen, the survey showed.

PlayStation 3 is being outsold by Wii by about two to one, causing Sony's game division, its second-largest by revenue, to post a fourth-quarter loss of 121 billion yen and a record 245 billion yen deficit for the fiscal year, according to five of the 11 analysts. The loss may exceed profits from electronics such as Bravia televisions, and the movie unit, whose ``Spider-Man 3'' generated record box-office sales when it opened this month.

``The extent of the recovery in the game business will be the main theme this fiscal year,'' said Naoki Fujiwara, who oversees $720 million at Shinkin Asset Management Co. in Tokyo.

Chief Executive Officer Howard Stringer, 65, who took over in 2005, promised to raise the company's percentage of annual operating profit, or sales minus the cost of goods sold and administrative expenses, to 5 percent of revenue by the end of March 2008. That would be the highest annual operating margin since the year ended 1999.

``This year will be the first time Stringer's management really comes under scrutiny,'' said Fujiwara.

Sony spokesman Shigenori Yoshida declined to comment for this article because the company reports earnings tomorrow.

Record Games Loss

Sony will probably fall short and generate an operating margin of 4.1 percent, according to the survey. Last fiscal year, Sony had an operating profit of 80 billion yen, or 1 percent of sales, the survey showed.

Production delays for PlayStation 3 have left Sony in third place in worldwide sales of the newest generation of consoles behind Nintendo's Wii and Microsoft Corp.'s Xbox 360. Sony is still the world's biggest console maker because of sales of its older PlayStation 2 machines.

Ken Kutaragi, developer of the PlayStation game consoles, will step down in June after production stumbles forced the company to slash shipment targets.

By comparison, Kyoto-based Nintendo last month reported profit in the company's latest quarter jumped sevenfold on sales of Wii consoles and portable DS game players. The company expects to sell 14 million Wii units this fiscal year, more than double the number sold in the previous year it was introduced. The Wii features a motion-sensor controller that allows a user to play virtual games of tennis and bowling, and costs about $250, half the price of the PlayStation 3.

Price Cuts

Sony sold 501,000 PlayStation 3 consoles in the U.S. from January to March, compared with Wii sales of 1.03 million, according to market researcher NPD Group Inc., based in Port Washington, New York. Microsoft sold 721,000 Xbox 360 players.

More than 205 million PlayStation and PlayStation 2 consoles have been sold worldwide since 1995. Sony in September cut the retail price of the PlayStation 3 in Japan before sales started.

The company also had to postpone the launch of the game machine in Europe by four months to March, because of a production delay in parts used in the Blu-ray DVD player used in the console.

``The 5 percent margin target is reachable if there is no price cut in the PS3,'' said Hitoshi Kuriyama, an analyst at Merrill Lynch Japan Securities Co., who has a ``buy'' rating on Sony. ``But I'm expecting a 20 percent price cut this fiscal year, and if that happens, the margin will not reach 5 percent.''

Bravias, Cyber-shots

Sony probably generated profit from all divisions other than games in the latest quarter, led by the consumer electronics business, as a weaker yen helped bolster sales of Bravia televisions and Cyber-shot digital cameras.

Operating profit from the consumer electronics division, second only to Matsushita Electric Industrial Co. in terms of sales, will probably rise 43 percent to 283 billion yen this fiscal year, after climbing to 198 billion yen in the preceding 12-month period, according to the Bloomberg survey.

The weaker yen, which increases the value of overseas sales when repatriated back home, has helped Japanese exporters including Toyota Motor Corp. and Canon Inc. report higher profit in the latest quarter.

Spider-Man, Resident Evil

Profit from the movie division will probably rise 43 percent to 50 billion yen this fiscal year, boosted by ``Spider-Man 3'' and the third installment of ``Resident Evil'' featuring Milla Jovovich, according to the Bloomberg survey.

``The question is the balance between the electronics business and the game business,'' said Koichi Takatsuka, who oversees $1 billion at UAM Japan Inc. in Tokyo. ``And the question regarding Mr. Stringer is whether he is able to be a strong leader and show a clear vision.''

Ahh yes, the Sony financial reports are due around now aren't they... Just in time to be matched by the latest NPD US sales figures (Wii outselling PS3 by more than 3:1....).

This is just a prediction - with the real figures out tomorrow... but I find this number pretty scary from Sony:

"PlayStation 3 is being outsold by Wii by about two to one, causing Sony's game division, its second-largest by revenue, to post a fourth-quarter loss of 121 billion yen and a record 245 billion yen deficit for the fiscal year, according to five of the 11 analysts. The loss may exceed profits from electronics such as Bravia televisions, and the movie unit, whose ``Spider-Man 3'' generated record box-office sales when it opened this month.  "

...

So in the last 3 months, Sony's game division has lost approx 1.1billion - and 2.2billion for the financial year (last 12 months).

Ouch.

damn if you thought microsoft's 1 billion a year loss since x-box has debut was bad...

Sony is in danger of eating through all the profits the PlayStation brand has ever earned. I'd like to see someone do an examination of that--to see just how much they'd have to lose over the next 3 or 4 years in order to eat everything they've ever made.

I was quite surprised to hear about the profits Sony gained from the PS2 era. You'd think with over 100 million consoles sold, they'd have been pouring in billions upon billions of dollars. But, not so. I think they only saw 2 or 3 billion in profit. Revenue was through the roof, probably upwards of 25 to 35 billion dollars, but profit was so small in comparison. Taking a loss on hardware seems to be lunacy. If Nintendo had half the install pase the PS2 did, their profits would've been disgustingly high.

The stock price is nearly the same it was five years ago. Sony is certainly no Apple when it comes to growth.

Not good news, You all might disagree, but helathy competition is what the industry needs, Everyone has a DVD player. I just don't want any of the underlings to lose their jobs due to upper management decisions. Sony is still supporting the PS2, a lot of people have em and play em, they need soemthing more to entice them to get a PS3......To hell with.the system can do this or that...........GUT THE SYSTEM!!!! Have it play games only, sell it for 199 and still sell the 60g for higher, and give it as an option I dont hate sony, and dont love em, an executive decision needs to be made for restructuring, unfortunatel in the corporate world they want to blame, and fire people instead of fixing the problem. I say gut it, and give the industry a run for the money. they have already taken a hit, they need to restructure, instead of eating through the money they have made with PS2. There are too many Ego's at sony and they need to be fixed, not fired!

I still remember the time when the PS3 was also going to be a router...

@dpmn...whatever, long name there.. I must agree healty competition is crucial for the market, with only Nintendo showing profit (looking at gaming divisions) you could ask yourself if investors would start giving the industry a bad name. People that invest money mostley want to regain that money and more. So far Microsoft and Sony has failed to deliver this gen.