Excellent research.

Sony is indeed in a dire situation. Talks of bankruptcy are very premature (the comapny has sufficient capatial). That said, they have to return to profitability ASAP.

Sony is a huge business that spans diverse product lines. From movie studios to walkmans. The gaming division used to carry Sony in the glory days of the PS2 but it is losing money for several years now. Big money. This year the gaming division will be responsibile for about a $Billion in loses. Perhaps more with the dismal performance of Sony's 1st party games this quarter.

At some point someone will start asking the tough questions. "Why are we willing to take such loses? Setting aside the nostalgic sentiments for the success of the PS2, do we have any propspect of making money in the gaming business?"

The answers don't look good. Not only that Sony will never recover its loses on the PS3, getting to profitability in any given quarter is also questionable. The cost structure of the PS3 is just too high, the install base is too small to justify the costs of their gaming studios, the currency exchange rates are killing their revenues and the competition and economic situation positions them as a "luxery, high priced item".

Another year of red-ink might force Sony to exit the market.

excellent post NJ5...i was going to make the exact same one except you did a much better job than i would have.  with that said...i had a very specific question i wanted to lead up to...

sony basically got f*@#'ed by the strong yen and sony really needs that to change back in their favor.

1. why the hell did the yen suddenly get so strong?  okay, yeah, it is to do with the economic crisis and all but what are the specific contributing factors.  it's not like japan is doing any better than the rest of the world right now so why is their currency suddenly be so strong?

2. what "perfect storm" of events need to occur for the yen to return to its normal value?

I'm not going to pretend I'm an expert on the economy, but as far as I know it's not so much the yen getting strong, it's more the Euro and dollar getting weaker (taking associated currencies along with them).

American and European governments are printing a lot of money to bailout banks and whatnot, and this makes the currencies less valuable. When there's more of something, it always becomes less valuable.

From what I'm reading, I don't expect the dollar to get stronger, I haven't seen so much analysis on the Euro but it's probably not going to fare much better. There's still a lot of crap waiting to happen, with credit card debt appearing to be one of the next things to explode.

From what I've heard it's not just the money being printed but also that Japan is one of the few first world nations with strict banking rules and practices. People have taken this as a sign that Japanese banks are sitting on signifcantly less bad debt than their US and European counterparts since a lot of their funds are infact invested in Japanese infrustructure rather than abroad and a lot of the foreign held debt has traditionally been in bonds rather than banks. In response to the current crisis a large number of people have taken their money out of stockmarkets and invested in currecy, Japan so far has proved to be a safe bet, which has resulted in large gains by the Yen against the Dollar and Euro.

Ironically while this is helping increase the international buying power of Japan it's starting to cripple the export market since Japanese companies have traditionally been able to count on the deliberatley weakened yen to boost earnings since the vast majority of products are being sold overseas. So while Japanese banks might make it out of the recession fine Japan an export driven country is in for a whole world of hurt. So expect to see Japan doing something drastic to devaule it's currency in the next year if things don't improve, being an export based economy with extremely limited natural recourses can be very tricky during a recession.

Anyhow I see Sony selling/spinning off a number of its divisions, personally I think Sonys become too big and the overall lack of focus has been killing the company over the last several years. Divesting itself of BluRay which won't show solid profits for a number of years if ever, dropping its record labels and setting its focus primarily back on electronics where it still has good penetration would be a good start.

It would be bad news if MS were to dominate console business as imo it would mean the end of cheap consoles and games.

As an earlier poster has said Sony has a good reputation in the electronics industry and will most likely weather the storm.

Ever heard of a certain company called Nintendo? ;)

Sony isn't so dead set on JUST "Playstation 3" any more, they are branching out for a synergy type approach with PS3 and the PSP. If both do decent, then it's fine, and it's just doing exactly that.

Sorry I meant HD consoles.

So in summary, sony cant be in the electronics business, because they will go bankrupt, and should just give up and keep there money.

That is what your saying

Eh, Sony will be fine. I am more concerned about the big 3 auto companies going under. Sony might not have the resources to make a PS4 though if thats what you are getting at.