Sony Financials: Operating Income Sinks By 51%

Sony Financials: Operating Income Sinks By 51%

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PS4 research and development expenses hit the Game segment hard, this quarter.

Sony's financials for the quarter ended September 30th are out, and don't make for cheerful reading. Sony wiped more than $151 million off of its operating income balance, a drop of 51% when compared to the previous year. A huge chunk of that is attributable to Sony's other interests; the flop that was White House Down hit its Pictures segment hard, and people really aren't buying Sony's cameras and televisions. Even the smartphone segment, which posted considerable sales gains, still made an operating loss.

But what of Games, you ask? Games made an operating loss as well, but a relatively modest $8 million down; it could have been worse. Part of that is attributed to a price reduction in the PS Vita, which encouraged sales but hit the bottom line hard. Software sales helped pump up the results, but the big problem for Sony's Game segment has been research and development costs for the PS4, due out this November.

Sony's changed its financial forecast for the year ending March 31st, 2014. It's cut its operating income forecast by 26.1%, and its sales and operating revenue forecast by 2.5%. But that doesn't reflect Sony's confidence in its Game segment, which it thinks will do well in the coming months; the revision has more to do with Sony's lack of confidence in its other business segments, notably Imaging Products and Home Entertainment.

Source: Sony

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Sony used to be the king of TVs, their Trinitrons used to be some of TVs around. They just couldn't keep their market share in the face of Samsung and LG, now they are slightly overpriced and slightly under-featured compared to the stuff coming out of Korea. The same seems to be holding true for cameras, not sure why that is though as I'm not into photography.

So they are still making 450 million.

Why is it companies have to maximize profits every single quarter? This isn't like they are running a loss. Operating income is after operating expenses have been deducted. So they are making a profit... just not as big as they would like... excuse me I have to get my tiny violin so I can play you a tiny song. Can't you be happy with a 150 million profit? Do you really need that extra 150 million that badly? Why not just sit back and say.

"By the mountain gods, my business is running along steadily making a nice clean profit larger than most people will ever see in their life. That's pretty neat, we'll see what next year brings when we launch the stuff we've been investing money in."

I blame investor mentality for this.

1337mokro:
Operating income is after operating expenses have been deducted. So they are making a profit...

Nope. There are still typically quite a few expenses which are not part of operating expenses. If they're making an operating loss, their net income could be even worse once things like interest on debt, investments, etc. get factored in. Hell, they could have positive operating income and still have a loss for overall net income depending on how everything else shakes out.

J Tyran:
Sony used to be the king of TVs, their Trinitrons used to be some of TVs around. They just couldn't keep their market share in the face of Samsung and LG, now they are slightly overpriced and slightly under-featured compared to the stuff coming out of Korea. The same seems to be holding true for cameras, not sure why that is though as I'm not into photography.

the problem (compared with the past) is innovation. the Trinitron (aperture grille based CRT) was very much an sony innovation and blew away the shadow mask sets that existed at the time. then there's the invention of the walkman/portable music player with which they created something entirely new. then there's the repositioning of the console games market they undertook with the PS1 where they deliberately focused on an older demographic (and the rest of the industry followed suit...except Nintendo).

sony was once "the apple of its day".

not any more tho...

but then neither is apple :P (maybe)

comes to all i would suggest...

1337mokro:
So they are still making 150 million.

Nope, they lost over $150 Million (They actually lost $200 Million, but that is over $150 Million) from July-September. This is due to a number of things:

1) Gearing up for the PS4 launch.
2) A number of their movies tanking this quarter.
3) Their Smartphones, while getting better, are still not becoming a major player in the Phone market.
4) The rest of their departments such as TV and Cameras are loosing ground and money fast.

I hope that cleared up your confusion.

Vivi22:

1337mokro:
Operating income is after operating expenses have been deducted. So they are making a profit...

Nope. There are still typically quite a few expenses which are not part of operating expenses. If they're making an operating loss, their net income could be even worse once things like interest on debt, investments, etc. get factored in. Hell, they could have positive operating income and still have a loss for overall net income depending on how everything else shakes out.

I am talking about their projections for this year and their net income. Not their quarterly report. I made a mistake and wrote down 150 million when I meant to cite their net income of 450 million.

Their projection is still an operating profit of about 170 billion yen. Which would end up roughly around the 400 million net income.

So basically this generation could the last time we see a sony console? And if Microsoft goes out of the business as well who will rule? Valve? Monopoly over pc and console market? The horror!

Mr.Mattress:

Nope, they lost over $150 Million (They actually lost $200 Million, but that is over $150 Million) from July-September. This is due to a number of things:

1) Gearing up for the PS4 launch.
2) A number of their movies tanking this quarter.
3) Their Smartphones, while getting better, are still not becoming a major player in the Phone market.
4) The rest of their departments such as TV and Cameras are loosing ground and money fast.

I hope that cleared up your confusion.

Sony had better hope the PS4 does well quickly. However, this being a console's first year all signs point to "No", especially since some issues are starting to be revealed with the PS4.

james.sponge:
So basically this generation could the last time we see a sony console? And if Microsoft goes out of the business as well who will rule? Valve? Monopoly over pc and console market? The horror!

... Wouldn't it be Nintendo that rules again with Valve trying to compete with them?

1337mokro:

Vivi22:

1337mokro:
Operating income is after operating expenses have been deducted. So they are making a profit...

Nope. There are still typically quite a few expenses which are not part of operating expenses. If they're making an operating loss, their net income could be even worse once things like interest on debt, investments, etc. get factored in. Hell, they could have positive operating income and still have a loss for overall net income depending on how everything else shakes out.

I am talking about their projections for this year and their net income. Not their quarterly report. I made a mistake and wrote down 150 million when I meant to cite their net income of 450 million.

Their projection is still an operating profit of about 170 billion yen. Which would end up roughly around the 400 million net income.

Ah, fair enough. Simple misunderstanding then. :)

Mr.Mattress:
... Wouldn't it be Nintendo that rules again with Valve trying to compete with them?

Nintendo's basically proven they don't know how to compete for Sony and Microsoft's customers so I'm not sure they'd be ruling. But we'll probably never see a time when there's no competition in the gaming market. I mean, of every company that was making consoles prior to the release of the Playstation, Nintendo is the only one left standing. But we've still got Microsoft and Sony, along with Valve looking to make a different sort of play for the living room and micro consoles trying to carve out a niche in the market. And that's to say nothing of smart phones and tablets being around as gaming platforms right now.

Seems like the competition is pretty fierce in the living room at the moment.

Still waiting for that magical moment when Sony hardware and Sony media proclaim irreconcilable differences and split. Seriously, those two sides have contrasting goals, and they'll continue to butt heads and cause issues with each other until they're both completely separate entities. Problem is Sony's hardware division would never do that, because Sony Music and Pictures make mountains of cash.

Besides, it's clear that the Playstation brand is famous enough that it wouldn't go away, even if Sony was to fall onto even harder times. That part of Sony could easily be sold to someone else, and could still easily thrive. Hell, imagine what could happen if all Playstation rights and patents were sold to a company like Samsung or LG.

Mr.Mattress:

james.sponge:
So basically this generation could the last time we see a sony console? And if Microsoft goes out of the business as well who will rule? Valve? Monopoly over pc and console market? The horror!

... Wouldn't it be Nintendo that rules again with Valve trying to compete with them?

I was gonna say, why leave out the big glowing elephant in the room? Furthermore, I can't help but think that the Steambox is going to be a disappointment for a lot of people. I have NO clue who that's for.

Much of the happy news in the rapport is down to the artificial weakening of the Yen that has been a priority of the current Japanese government. A year ago the Yen was 80 to the dollar, it is now 100 to the dollar. This is a good way to boost short term profits for an export dependent company but it tends to hide real problems. Take for example their camera division that showed a 7% decline in income but adjusted for currency developments its down 24%. Income from TVs increased by 12% but with currency fluctuations included it actually decreased by 12%. Markets dowsnt seem to be amused by Sonys rapport at least.

james.sponge:
So basically this generation could the last time we see a sony console? And if Microsoft goes out of the business as well who will rule? Valve? Monopoly over pc and console market? The horror!

Well Nintendo could always make a resurgence after the Wii U (hell there's a slim chance that the Wii U will pick up steam in the future). But if MS and Sony go we'll at least still have two console producers.

Aiddon:

I was gonna say, why leave out the big glowing elephant in the room? Furthermore, I can't help but think that the Steambox is going to be a disappointment for a lot of people. I have NO clue who that's for.

Ever since the Wii took off and dominated the market, it seems that gamers and general gaming sites decided to start pretending Nintendo doesn't exist. Though despite this fact and a slow start for the WiiU, Nintendo apparently still controls over 50% of the gaming hardware market.

http://www.nintendolife.com/news/2013/10/satoru_iwata_highlights_a_strengthening_worldwide_market_share_for_3ds

Everyone was saying the 3DS was a huge failure, the 3D was gimmicky and dumb, and that it was all proof that Nintendo was completely out of touch and there was no market for a dedicated gaming handheld. Now it's selling like mad, and that's not even including the most recent boost from its first Pokemon title. I'm not saying WiiU will reach the same levels of success, but once the titles come, it'll pick up pace. Hopefully some smart business moves will help it along to keep the market diverse.

1337mokro:
So they are still making 450 million.

Why is it companies have to maximize profits every single quarter? This isn't like they are running a loss. Operating income is after operating expenses have been deducted. So they are making a profit... just not as big as they would like... excuse me I have to get my tiny violin so I can play you a tiny song. Can't you be happy with a 150 million profit? Do you really need that extra 150 million that badly? Why not just sit back and say.

"By the mountain gods, my business is running along steadily making a nice clean profit larger than most people will ever see in their life. That's pretty neat, we'll see what next year brings when we launch the stuff we've been investing money in."

I blame investor mentality for this.

Welcome to capitalism, where the whole point is to make as much money as possible.

It's the economic system we live with, and for the most part, it hasn't killed us. ... Yet.

Sad to hear, I grabbed a Sony Brevia and Z1 these last few months and their great devices. Problem is people want cheap which Sony doesn't do. Their great for quality but not for a budget.

RicoADF:
Sad to hear, I grabbed a Sony Brevia and Z1 these last few months and their great devices. Problem is people want cheap which Sony doesn't do. Their great for quality but not for a budget.

Thats basically sony in a nutshell. Good quality, high price.
Sadly, thats not what people wan nowadays. they want flashy features as cheap as possible, thus they end up buying crap like HP and live to regret it. though i have to admit all LG products i had was outstanding, so they arent really that bad.

 

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