Sony Cuts Profit Forecast By 70%, Faces $300 Mill Extra Costs

[Karloff]

Sony Cuts Profit Forecast By 70%, Faces $300 Mill Extra Costs

Selling the PC division has hurt Sony's bottom line much more than Sony anticipated.

Sony's profit forecast has taken a massive hit thanks to $300 million in extra costs associated with the sale of its PC division. The profit forecast for the year ending March 31st has been revised downward by almost 70% as a result. Weak demand, particularly in Europe, for physical media has also hit Sony hard. Sony always knew the day would come when its customers stopped caring about DVDs and CDs, but it hadn't expected it to come quite as quickly as this. The contraction in demand cost Sony ¥25 billion (c. $242 million).

Sony's now looking at a net loss for the year of ¥130 billion ($1.27 billion), which is about ¥20 billion more than the loss it forecast back in February. The big problem with its PC market is that as soon as Sony announced it was selling off the division [http://www.escapistmagazine.com/news/view/132049-Sony-Q3-2013-Financials-PC-Division-Will-Be-Sold-PS4-Pushes-Income-Up], people stopped buying. Again, this was something Sony expected, but it didn't expect the hit to be so severe.

"Consequently, Sony expects to record write-downs for excess components in inventory and accrual of expenses to compensate suppliers for unused components ordered for Sony's spring PC lineup," said the company [http://www.sony.net/SonyInfo/IR/financial/fr/13revision_sony.pdf] in a statement.

"In addition, certain restructuring charges are expected to be recorded ahead of schedule. As a result of these factors, an additional total amount of approximately ¥30 billion in expenses is anticipated to be recorded in the fiscal year ended March 31, 2014."

These losses are counterbalanced by the cost-saving measures, redundancies and sell-offs Sony has been implementing over the last year, but the impact on its bottom line has still cut drastically into its operating income, which has been slashed from ¥80 billion to ¥26 billion.

Source: Guardian [http://www.theguardian.com/technology/2014/may/01/sony-slashes-profit-estimate-70-percent]


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[Dragonbums]

A $1.27 billion dollar loss. They didn't even recuperate the $5 billion dollar loss that the PS3 at launch blew a hole in.

Oh man, I wonder where are all the Sony Doomers?

 

[josemlopes]

I dont know how people outside of the group of specialised people in that sort of field can understand what the fuck goes on with these companies, one day everything is great and they are printing money, the next day its like they are going bankrupt. And then they are printing money again...

 

[Church185]

Damnit Sony, get your shit together!

On a more serious note, while selling of the computer division is hurting them in the short term, I believe it will help them in the long run. VAIO computers were way overpriced for what you were getting and they never really sold very well. Hopefully trimming the fat will be enough to keep the games division off the chopping the block.

Oh man, I wonder where are all the Sony Doomers?

Sony fanboy reporting in!

A $1.27 billion dollar loss. They didn't even recuperate the $5 billion dollar loss that the PS3 at launch blew a hole in.

Sauce?

EDIT: Nevermind, found some sauce...

All I can say is I hope the success of the PS4 and Sony's current strategy of trimming off parts of the company that don't make money will save them. It's going to be an uphill battle, but all we can do at this point is hope.

PS4 isn't loss leading this time, and it's selling like hotcakes, so they are actually making a profit right out of the gate. Might be enough, but only time will tell.

 

[endnuen]

This makes me sad. I hope they come out of this in a good enough shape.

 

[Lightknight]

Well yeah, of course an electronics company is going to have some heavy hits in their electronics division when their hardware becomes obsolete. It's nice that they're trying to mitigate those losses though. At least they still have TVs, Consoles, and their much larger array of IPs and general entertainment products.

A $1.27 billion dollar loss. They didn't even recuperate the $5 billion dollar loss that the PS3 at launch blew a hole in.

Oh man, I wonder where are all the Sony Doomers?

Sony has $151.13 Billion in assets and $28.52 Billion in equity.

I'd say that they're going to get a lot smaller in the coming years but doom isn't anywhere close. But to put this all in perspective they made $72.35 Billion in Revenue last year. In the grand scheme of things being $1.27 Billion is really close to breaking even (from Sony's perspective). I mean, even with that $72.35 Billion Revenue they only came away with $458 Million in net profit. This is most likely a sign that they are pumping huge amounts of money into research to make the future of their business viable. Frankly, this is how the books should look at such a momentous shift in tech.

Their main industries are changing. They will drop and have to shed the dead weight. It's particularly hard this time because it isn't tape changing to CD. It's disk player changing to streaming/storage device. Something that is essentially the eventual death of physical media as we know it. Sony is just lucky that they have branched out so far over the past several decades.

 

[Something Amyss]

Hopefully trimming the fat will be enough to keep the games division off the chopping the block, but only time will tell.

Wouldn't it be weird if after all the speculation and rumours about Microsoft selling off their gaming division, Sony was the one to?

Not saying it'll happen, mind.

A $1.27 billion dollar loss. They didn't even recuperate the $5 billion dollar loss that the PS3 at launch blew a hole in.

Oh man, I wonder where are all the Sony Doomers?

That is a fair comparison. I mean, one of the primary reasons this is a concern for Nintendo is that Nintendo is focused on gaming, and we all know that Sony is only involved in the computer market. It's not like they've had multiple profitable divisions over the last couple of years which are still fiscally viable or anything.

Yikes. It looks like Sony has some serious structural problems :s That's the issue with consumer products companies this size, if they don't change rapidly enough they can can financially hammered.

I think that their biggest structural problem is that they have been "restructuring" for several years now to little change. This may have prompted the jettison of their computer brand, actually, but I couldn't be arsed to look it up after looking at their other financial info.

 

[Church185]

Wouldn't it be weird if after all the speculation and rumours about Microsoft selling off their gaming division, Sony was the one to?

The irony would be rich. I'm hoping that because the PS4 isn't loss leading this time around the games division will be profitable enough to miss the ax.

 

[Something Amyss]

Though valve beats them because they have Gaben.

Who apparently died for your sins, yet is powerless to do anything about Episode 3 or any other title you want because Gaben works in mysterious ways.

Microsoft doesn't have that much of a rapid fanbase because "microsoft is evil" has been hammered home since apple became popular.

Even with the disaster that is the Xbone, Microsoft still has plenty of so-called Xbots, and they're regarded about as well as the Sony rabids.

Fun fact: I am apparently an Xbox fanboy, Xbox hater, Sony fanboy, Sony hater, Nintendo fanboy, Nintendo hater, PC fanboy and PC hater all at once.

I'm just that talented.

Well yeah, of course an electronics company is going to have some heavy hits in their electronics division when their hardware becomes obsolete.

Unfortunately, this isn't the beginning or end of their problems.

 

[Something Amyss]

The irony would be rich. I'm hoping that because the PS4 isn't loss leading this time around the games division will be profitable enough to miss the ax.

Their gaming division appears to be doing fine, though I haven't read the most recent bits in detail. So that may have changed, but I'm betting it hasn't.

 

[Gorrath]

Though valve beats them because they have Gaben.

Who apparently died for your sins, yet is powerless to do anything about Episode 3 or any other title you want because Gaben works in mysterious ways.

Hah! Nice comparison there, even if I rather do like Valve and Steam. I'll see you at open mic night.

 

[Casual Shinji]

I'm afraid Sony is slowly but surely on its way down. They're the old alpha dog that's been resting on its laurels, while the new pup on the block (Samsung) has been stealing all the glory.

Though I heard a lot of what's been suffocating them is their outdated Japanese business practices.

They're too big for any real restructuring, and they're too big to simply collapse. So it looks like we're going to end up with a colossal zombie that's just gonna keep marching on.

 

[Aiddon_v1legacy]

A $1.27 billion dollar loss. They didn't even recuperate the $5 billion dollar loss that the PS3 at launch blew a hole in.

Oh man, I wonder where are all the Sony Doomers?

Conveniently absent because that goes against the weirdly zealous idea that Sony is some sort of revolutionary company when in fact it's an old fogey that doesn't really know how to make a profit anymore. Especially when they have $126 BILLION in liabilities. Not a good place for a company to be

 

[J Tyran]

Did I get that right: people stop buying physical media in Europe?

Guess I must have missed something, because consensus in my social environment is physical media with dynamic price > downloads with fixed price. Especially when we're talking about up to 50 GB worth of data per title.

Sony is either looking for an excuse to scrap physical media asap or half of Europe has gone mad.

Yeah I don;t get this, I don;t use physical media anymore but with services like Ultraviolet you can shop around to get the physical disk at the right price and still get a digital copy and throw the disk in a box out of sight somewhere.

 

[EvilRoy]

A $1.27 billion dollar loss. They didn't even recuperate the $5 billion dollar loss that the PS3 at launch blew a hole in.

Oh man, I wonder where are all the Sony Doomers?

The issue is one of scale. When you or I say $6.27 billion dollars in losses it certainly sounds like a lot of money, but to Sony it really isn't that much. In terms of total assets it represents a 4% loss, and in terms of Net shareholder equity it represents about 17% loss.

The first number is why there is really no need for concern, the second number is why Sony - despite this not being a large concern - is more aggressively pursuing a black budget than previously. The idea is that operating losses like this happen all the time to companies of this size, but a failure to make an effort to reclaim the lost money could reduce shareholder confidence and snowball into a larger problem for the company, by reducing their shareholder equity.

 

[Church185]

Conveniently absent because that goes against the weirdly zealous idea that Sony is some sort of revolutionary company when in fact it's an old fogey that doesn't really know how to make a profit anymore. Especially when they have $126 BILLION in liabilities. Not a good place for a company to be

Your Nintendo zealotry must have blinded you to the fact that people are already saying Sony is in a bad spot in this very thread. Before you even showed up to snark that they were absent. I should know, I was one of them.

Here I was thinking the NDF couldn't get any sillier.

People who live in glass houses and all that...

 

[SonOfVoorhees]

An thats the reason PS4 is a PS3.5, they really couldnt risk making a console that could fail. They even said if the PS4 failed there would be no PS5. Even now Sony products arent considered the best any more, yet they still charge a lot of money for them. I hope they survive their financial difficulties.