PS3 costs drive down Sony result

[Crossbar]

It seems like we should not expect to much fancy upgrades of the PS3, as Sony probably want to start make money as fast as possible. I guess they are considering every nickel of its manufactoring cost.

Electronics giant Sony has seen a 46 per cent slump in its profit for the three months ended September 30th, with the enormous cost of developing the PlayStation 3 console fingered as a key factor in the decline.

The firm reported net income of 28.5 billion Yen (204 million Euro) for the quarter, which is down massively from the 53.2 billion Yen (380 million Euro) figure reported in the same period last year, and also falls below analyst average estimates of 30 billion yen (214 million Euro) reported by Bloomberg.

The costs associated with the creation of the PlayStation 3 - for which Sony is building new hi-tech manufacturing facilities and has co-created a new processor architecture, Cell, with IBM and Toshiba - are a headline factor in the profits shortfall, along with a worldwide decline in the price of television sets.

The news will come as another blow to Sony's already embattled share price; the firm has lost nearly six per cent of its value on the Nikkei stock market this year so far, compared with a 17 per cent rise in the value of the Nikkei 225 Index as a whole.

One of the toughest battles it faces at present is in the digital music player market, where its Walkman brand has been overtaken by products from rivals including Apple Computer. The firm hopes that the PlayStation Portable, which has sold quite strongly since its introduction late last year, will help to re-establish its dominance in the portable media market

http://gamesindustry.biz/content_page.php?aid=12563

[casualkiss]

I wouldn't count out any upgrades (or $350 price) just yet! Keep in mind that these costs are related to building the facilities to make the components and not the PS3's components themself.

So hopefully Sony's investors recognize these costs are one-timers and will tolerate packing as much into the PS3 as possible knowing costs will plummit with volume.

In other news, I actually think now might be a good time to pick up some Sony stock! Sure their TV's now suck, but its future pipeline looks pretty good.

[casualkiss]

Also, (completely unrelated), how will blu-ray upgrades work?

Assuming that PS3's blu-ray will support dual-layer 50GB discs (man, I hope so!), will it also support larger discs in the future (up to 200GB)?

Do 8 layers discs require different hardware than 2 layer discs?

I trully hope that each upgrade to blu-ray discs does not require a brand new drive. (that would be the kiss-of-death). Hopefully, the manifacturers are anticipating larger discs in the future and are incorporating the technology needed to read them.

[xbdestroya]

I really dislike when game sites report on company financials - they hype it up way too much. Stringer already announced at the Sony conference last month that Sony would probably make a loss overall for the year - so this seems in line with that.

In addition, the games division itself actually posted a profit, contributing to the bottom line in spite of PS3 R&D.

Here's the quarterly report for the games division:

Game
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2004 2005 Change in 2005
Yen
---------- ------ ------ ------ ------
Sales and operating Y119.6 Y214.2 +79.1% $1,896
revenue
Operating income (loss) (0.0) 8.2 - 73

Unless otherwise specified, all amounts are on a U.S. GAAP
basis.

Sales increased 79.1% compared with the same quarter of the
previous fiscal year (a 77% increase on a local currency basis).

Hardware: In addition to the significant contribution to sales
from PSP, an increase of PlayStation 2 ("PS2") unit sales in
Europe and the U.S. compared to the same quarter of the previous
fiscal year resulted in a significant increase in sales in all
geographic areas.
Software: Overall software sales increased as a result of the
contribution to sales from PSP software, despite a decrease in
PS2 software sales. On a regional basis, revenue significantly
increased in Japan and Europe, although it slightly decreased in
the U.S.

Operating income of Y8.2 billion ($73 million) was recorded
compared to a very small operating loss in the same quarter of
the previous fiscal year mainly due to the favorable performance
of the PS2 and PSP businesses. This was partially offset by an
increase in selling, general and administrative expenses mainly
reflecting advertising and marketing expenses associated with
the launch of PSP incurred during the quarter, as well as
continued aggressive research and development spending
associated with the PLAYSTATION 3 business.
Worldwide hardware production shipments:*
-> PS2: 5.01 million units (an increase of 3.02 million units)
-> PSP: 3.75 million units**
Worldwide software production shipments:*
-> PS2: 50 million units (a decrease of 6 million units)
-> PSP: 9.0 million units**

*Production shipment units of hardware and software are counted
upon shipment of the products from manufacturing bases. Sales of
such products are recognized when the products are delivered to
customers.
** There were no sales of PSP during the same quarter of the
previous fiscal year.

Inventory, as of September 30, 2005, was Y114.9 billion ($1,017
million), a Y61.5 billion, or 115.2%, increase compared with the
level as of September 30, 2004 and a Y30.9 billion, or 36.7%,
increase compared with the level as of June 30, 2005.

Sony quarterly result (http://quote.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=SNE:US&sid=apkfwsnqopJc)

[dantruon]

dont worry, what you put in is what you get out, sony is investing a huge amount of fixexd cost in the ps3 and blu-ray and there is no doubt that the ps3 will sell like hotcake once is released, with new mangagement and new product, this is the best time to buy Sony share.

[Domination]

It seems like we should not expect to much fancy upgrades of the PS3, as Sony probably want to start make money as fast as possible. I guess they are considering every nickel of its manufactoring cost.


http://gamesindustry.biz/content_page.php?aid=12563


That artical really fudged Sony's finances up pretty good. It's like when something is mentioned, people totally forget about until it's mentioned again. :tardbang: It was mentioned almost in the begining of 2005 that Sony was expecting a huge decline in sales by the end of the year, and that was before Howard Stringer was put incharge. http://community.the-underdogs.org/smiley/misc/disgust.gif It was apart of reconstructuring, they said.

[Z]

yup, reconstruction and building two state of the art fabs is the reason for this. but as casualkiss said, this is one of those moves that are't going to happen every year. these are made for the long run; an investment for the future. Sony is beefing up their TV line with the focus on HDTVs and Cell enabled sets. I expect the beginning of 2006 to be a start of a very good performance for the next decade or so. Sony has so many great things going on; Cell, BD and PS3 are all potential jagurants. remember that PS2 is SCEI's most profitable line. I expect the same for PS3, let alone Cell and BD other market potentials.

[Crossbar]

That artical really fudged Sony's finances up pretty good. It's like when something is mentioned, people totally forget about until it's mentioned again. :tardbang: It was mentioned almost in the begining of 2005 that Sony was expecting a huge decline in sales by the end of the year, and that was before Howard Stringer was put incharge. http://community.the-underdogs.org/smiley/misc/disgust.gif It was apart of reconstructuring, they said.
Well, the result does not always follow what has been estimated ask any stock broker :) . I think the result is newsworthy especially when it is set in relation to PS3 development costs. They probably want return on investment, but I hope they have a plan that is not to short sighted. Japanese companies in general seem to plan for long term returns in comparison to western companies, so I am not really that worried.

[Coded-Dude]

yup, reconstruction and building two state of the art fabs is the reason for this. but as casualkiss said, this is one of those moves that are't going to happen every year. these are made for the long run; an investment for the future. Sony is beefing up their TV line with the focus on HDTVs and Cell enabled sets. I expect the beginning of 2006 to be a start of a very good performance for the next decade or so. Sony has so many great things going on; Cell, BD and PS3 are all potential jagurants. remember that PS2 is SCEI's most profitable line. I expect the same for PS3, let alone Cell and BD other market potentials.

Well said, after reading the initial post I wanted to invest in Sony stock(while the price is low).

[The_One]

Do 8 layers discs require different hardware than 2 layer discs? Put simply, yes.

[Domination]

Well, the result does not always follow what has been estimated ask any stock broker :) . I think the result is newsworthy especially when it is set in relation to PS3 development costs. They probably want return on investment, but I hope they have a plan that is not to short sighted. Japanese companies in general seem to plan for long term returns in comparison to western companies, so I am not really that worried.

That's true, and I'm not saying it isn't, but the decline in share was something that was already expected even if it did somehow turn up different. In fact, it was compared to the first major decline in the company a few years back. But I do understand your point, though. :)