More US dollar gloom flowing in. Ouch, some guy is predicting 80 yen per dollar in 2009. If it gets to that point, I suspect even Nintendo would be squeezed (depending on the euro).

http://www.bloomberg.com/apps/news?pid=20601087&sid=azuNjokrEk88&refer=home

Depreciating a country's currency relative to another is not difficult for a central bank to accomplish. They need only "print" currency and purchase dollars/euros. There are a number of potential caveats.

1) Most countries cannot do this because significant portions of their debt are not priced in their own currency, and deflating their currency increases their debt.

2) Increasing the money supply haphazrdly can stoke inflation.

Japan has neither of these problems and actually has had frequent nasty bouts of deflation. Still, inflation is extremely difficult to quantify much less control, and is determined more by people's expectations (Keynes's animal spirits) than the actual quantity of paper currency in circulation. Even determining what the quatity of "money" is depends on your definition (see M1,M2, etc). The reality is, things like securities, houses, and cars are all forms of money. One could argue that the housing bubble allowed many real estate speculators to partially hijack control of the money supply. The point is, central banks usually try to err on the side of caution. Therefore to counter this what the BofJ normally does is issue "sterilization" bonds to soke up excess liquidity. Of course, that's how they ended up owning over a trillion dollars worth of T-bills which has it's own problems.

3) Other countries can potentially do the same to you kicking off a series of beggar-thy-neighbor depreciations (see the 80s).

4) Other countries can do other things such as put up tarrifs or nationalize your private and public assets.

Japan is extremely sensitive to this last point after the large public backlash against all things Japanese in the 80s in the US when people were burning Japanese cars on TV and such.

@alephnull: Thanks for your reply. The scenario you listed at 3) seems to be happening, and apparently the analysts' consensus is that the US dollar will weaken in the next few years.

Basically we may see a race between countries to devalue their own currencies... So far the USA is looking quite strong in this race, and European countries seem to be following the same measures.

With all the arms of the octopus that is Sony i don't think the gaming division is the real worry for them.

This is critical data useful for all range of future forecasts. Which is perhaps the real crux of these forums. So not only is this thread entirely relevant it is perhaps one of the most relevant threads. Whether its outcome is perceived as negativity. I am sorry whether someone says it or not this is still a problem for Sony. That means it is better to know so you can put the knowledge to good use. Even if it does not suit your purposes. Bottom line do not bitch about this.

The currency exchange rate is rather vexing for Sony's gaming division. The upcoming year was to be a return to profitability, and they soaked up the losses thinking there would be a turn around two years out. Now that is probably out of the cards for another year. Perhaps upwards of two years. That means four years of being unprofitable. With the PS2 sales substantially slipping, along with the PS3. Well its just grim. The investors have been placated in regards to gaming, but they do have their limits. They were promised profits this year, and if Sony goes out slashing prices, and the company eats more billion dollar losses on gaming the outrage could turn into action against the management.

Sony must do something radical in regards to their gaming. They really need to review their future plans. Market share may no longer be a priority for Sony. Especially if it bleeds them like this. Even being a console manufacturer may not be a priority. There is a real question as to whether they could even limp into a new console generation. For that to happen Sony would need to see profitability in the coming year.

The currency exchange rate is not entirely to blame for the current situation. Sony had a bad model that was losing buckets full of money prior to the recession. They also opted for the expensive alternative in a fast food world. Perhaps the best strategy for Sony is to amputate that which is bleeding them. Their hardware, and focus on bringing their software to multiple platforms. Were they to do that it would probably see them bringing in real profits by the end of next year.

The analysts continue their pounding:

(capex = capital expenditure)

Source

Sony's next financial reports are going to be pivotal to the company's strategic direction.

The gaming division is making only 13% of Sony's revenue but for the last two years it is consistently dragging down the company's profict by over 50% . (NJ5 will have the exact numbers).

The Playstation brand had transitioned from being the flagship brand for the company and instead became the symbol of everything that went wrong with Sony. The business performance of the gaming division is highly visible and the PS3 had become the whipping boy for the press, analysts and investors. Most of them are not playing any games.

One more disasterous quarter in the gaming division, perhaps two, and Sony's management will be pushed to take drastic measures. With this economy and the kind of pressure it is under, anything is possible. Anything.

@amirnetz: Well I'd have to check for the exact numbers, I don't memorize that stuff. If I recall correctly they've been making around $7 billion in profit per year, so it would be more like 20-25% perhaps.

Like cancelling the PS3, amirite?

>_>

@NJ5

I must wholeheartedly concur with the analyst. In the sense that the longer Sony dithers about not committing to radical adjustments. The more likely it is to be perceived as not making the necessary alterations. The company seems woefully oblivious to the troubled waters in which it floats.

That said I think Sony is biding its time through the end of this month so as to not negatively impact holiday sales for products, and services they probably have no intention of continuing through next year. With the gaming division I think it is probably a hard sell to stock holders for Sony to continue a loss leading console. Not when performers are starting to wane.

I have yet to read a valid answer as to why Sony should perpetuate the PS3 in this climate. That has to be one thing the investors are looking at. A billion dollar a year boondoggle waging one war it has no hope of winning, and another war it won a year ago. What exactly is the value of continuing this devastating venture. What is even the value of Sony even participating in the console market when the competition is hell bent on ensuring that if you are profitable it is marginally, and if your not profitable you have to lose billions.

Logic and prevailing economic conditions have me downgrading Sony gaming. A healthy warning do not invest in Sony gaming until you find out what those revisions are. Be them hardware, software, support, or price. Sony has no choice in the matter the hammer must come down, and if your looking at a losing division it is a safe bet the hammer will come down much harder there. Do not place yourself in a position where you are going to regret what you did in under six months.

Sony not disclosing their plans probably means what is going to happen is probably pretty heinous. That is the way things seem to go its the eerie silence that should scare you off. As long as people are talking you can feel safe, but if your suddenly not hearing anything then that is the real sign. What have you heard Sony gaming say about its financial situation recently?