Q2 FY08 Game

Sales:
• Overall segment sales increased as a result of an increase in PS3
and PSP sales

Operating Income:
• Primarily due to improved operating performance of the PS3 business
as a result of hardware cost reductions and increased software sales,
as well as strong sales of PSP hardware

Operating Income
Hardware
(mln units)
PSP 2.58 3.18 +23%
PS3 1.31 2.43 +85%
Software
(mln units)
PS2 38.0 23.1 -39%
PSP 12.6 11.8 -6%
PS3 10.4 21.1 +103%

The bolded part is from the table under games on Page 6 of the report posted in my previous post. Unfortunately I can't insert the table properly, you'll just have to read it.

I.e: The PS3 business is starting to bring in money. Their investment is starting to pay off.

You know, I didn't say a word about sales of the PS3?

Please take one minute and point out, where my mistakes are.

Here are my facts:                                                                                      true                              false

• The division lost 370 million Dollars                                                    [  ]                                [  ]
• The division is (mainly) for the Playstation-brand                               [  ]                                [  ]
• The PSP and PS2 are profitable                                                          [  ]                                [  ]
• The PS3 is not profitable                                                                     [  ]                               [  ]

When all these facts are true and there is a loss, which product is responsible for this loss? Got to be the PS3. If the loss is 370 million, the loss of the PS3 must be > 370 million, because PSP and PS2 earned money. So I estimate the profit of the PS2 and the PSP combined with 130 million for the past three months. So the PS3 lost 500 million USD in the last three months. (370 reported loss + the money earned by PS2 and PSP)

That the sales of the PS3 increased has nothing to do with anything and I never doubted it. But maybe I still got a brain-bug.

I agree that the -$380Mio figure is inexplicably high and I did not expect that at all. A very rough estimate would mean with:

55 Mio software sold = $220 mio profit

PSP hardware = slight loss (several redesigns, "lost inventory" due to new models in shops but still old stock in warehouse)

PS2 hardware = slight loss (complete redesign, "lost inventory" due to new models in shops but still old stock in warehouse)

PS3 hardware = to account for the $380mio loss, would have to be around $600 mio in the red.

With roughly 2mio units sold, this adds around $250 for every PS3 manufactured (the manufacturing costs are around $350 for a PS3). Such production costs of $600 are not conceivable at the end of the second production year (with close to 20 mio units already sold) _unless_ Sony really, really still screwed up with their contracts (and it is pretty sure they initially did that with their NVidia GPU contract).

So I am figuring there is some vital data hidden inside the bulk of data that can explain the massive losses in Q2 (maybe some of it hides in the inventory that increased by $800mio compared to last quarter).

I think what all DirtyP2002 was trying to say at first is that the PS3 is a financial burden to SONY's gaming division because of the loss. But to say "The product Playstation 3 is a huge financial failure for Sony..." I think is a bit too critical because of the state of the economy mainly outside of SONY's control.

you said " the PS3 still ruins it big time"

PS3 Sales were up 85% in hardware, the biggest rise in the division. PS3 Software was up 103%, the only software in the division to increase.

You might notice that I said false in your questionaire on the last question.

"False" because the PS3 brand must be getting profitable as it was a major factor in the higher operating income (loss) than last report, both on hardware and software.

We all know Sony took a hit developing the PS3. The PS2 also caused losses when it was first released.

Sony overall sales in the division increased as a result of an increase in PS3 Sales

Sonys operating income was half a billion dollars less of a loss in these reports Primarily due to improved operating performance of the PS3 business as a result of hardware cost reductions and increased software sales

Yet you still insist that the PS3 is a financial failure?

its not that easy, there is lots of other costs too like developement costs of new models and probably the first designs for next gen consoles, marketing costs, developement costs for software... also don't forget the effects of the high yen which also lowered the amount they earned of each console

i also think in q2 they probably allready start ramping up productions to have enough consoles on stock for holiday season if thats the case then that will also lead to increased costs (since the consoles won't be sold instantly).

its still likely that they still sold ps3 at a loss, but it would not be right to say PS3 is the only cause for the 370million dollar loss. but its nearly impossible to say how big the ps3 loss is actually.

This makes sense.  If PS3 hardware sales did NOT increase while still experiencing the same production cost, I would say it's a financial failure.  If PS3 hardware sales DID increase while still experiencing the same production cost, I would still say it's a financial failure.  But PS3 hardware sales did increase while reducing production cost and it's software also increased.  This is good, not great, but things are moving positively.

Simple math:

a*PS2+b*PSP+c*PS3 = -370 million dollors

where a,b,c are the profit for each unit and the names of each unit is the number of each unit sold.

Because we can only have positive nubers for units sold, it means that one of the 3 (a,b, or C) must be negitive.

So which one(s) is it?

i think you got the key with this. they started stockpiling for holiday season and have now spent about 800 million dollars  on bulding stocks of psp and ps3 which will get sold in holiday season (so they had to pay it in q2 quarter but will gain money of it in q3, which makes q2 number look worse and q3 number probably look better).

thats the part in the report that covers that

Getting profitable =/= is profitable.  Last I checked a positive and a postive don't sum up to a negative.

Yes things are heading in the right direction, but that doesn't mean that things are greta right now.  A smaller loss than a bigger loss is still a loss. 

Nor does the improvement indicate that things will be as rosy as the PS2 was in it's prime(not that you're suggesting that).  The fact of the matter is development costs are up and sales will be down for the PS3 compared to the PS2.