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

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

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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, 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 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

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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?

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. Personally i think Sony should try and compartmentalize it's divisions a lot more so if one goes south it won't affect the good ones.

I don't think Sony isn't dead by any means, they just really need to get themselves together. They make a LOT of money but finding where the profit is in all that turnover can be a headache when you are that large.

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...

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.

Dragonbums:
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.

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?

They're around. They can't say anything though or they get harassed and doxxed for being "paid shills for the devil."

yeah, that happens. A lot. Especially since Sony is the last bastion of mainstream console gaming left. If Sony goes down, consoles go down too.

Nintendo gets doomed and gloomed because their fans are docile and don't care. They know they are the best and won't bother. Sony however has a rapid fanbase that's almost on par with Valve. Though valve beats them because they have Gaben.

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

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

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.

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?

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.

Church185:
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.

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?

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.

Scrumpmonkey:
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.

Zachary Amaranth:
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.

Ultratwinkie:
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.

Lightknight:
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.

Church185:

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.

Zachary Amaranth:

Ultratwinkie:
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.

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.

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.

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?

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

Chaosritter:
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.

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?

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.

Aiddon:
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...

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.

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?

Not even one post before we get some jabs from the NDF's new master chief since jeffers passed away, why am I not surprised.

OT: I'm not sure what they were expecting...when you are selling off your PC division (this applies to any expensive electronic really) it obviously shows you don't have faith in your product..so why the hell would consumers continue to buy that? (at least at retail price, I'm sure sooner or later sony laptops will be selling dirt cheap, in which they'll be bought by the truckload.)

sony is so damn bloated of a company, I'm not sure if all this restructuring they've been doing the past few years will help them shed the dead weight off or just cause them to continue to snowball downhill.

Woah, that's a lot. Seems like Nintendo is really doomed.

On a serious note, Sony is in deep shit for a long time now. I don't know why they thought they would have a huge profit with all their divisions losing money.

Ultratwinkie:
If Sony goes down, consoles go down too.

I dont' want to be an asshole, but why do you hate video games so much?

Aiddon:

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?

Conveniently absent because that goes against the weirdly zealous idea that Sony is some sort of revolutionary company...

Yeah okay, how many people have actually said this in the last 6 years?

...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

And how many people have been saying this? Oh that's right, everyone in this very thread.

I know you like to jump to Nintendo's defence, but you're just jumping at shadows now, buddy.

Maybe if they'd lower the cost of their blu-ray licenses more people would be inclined to buy into the format, especially on the pc front where to watch legally you have to shell out for new player software every few years thanks to that stupid aacs stuff.

I remember when sony was the go-to brand for the best in electronics (I just came across my old discman from my high school days and it still works). They made the same mistake the US automakers did: they got complacent and the market got swept out from under their feet. What does it say when Microsoft has adapted better to the changing pc market than sony? (Bear in mind Microsoft has utterly failed.) It's like they just stopped trying once Apple and ipod took off. They didn't adjust to the mp3 player market, nor the smartphone market, nor the tablet market, nor the tv market (they were not a leader in features or pricing), nor the computer market. They have a habit of making great things or developing new tech but then squandering it through inaction (playstation peripherals are the penultimate example here) or inaccessible pricing.

The only thing they've done right is make the PS4 better than the xbone, but it's a costly division that may not be enough to make up for their overall failure to make things people want to buy.

Chaosritter:
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.

50 GB is nothing when you have 2 TB drives.

cypher-raige:
50 GB is nothing when you have 2 TB drives.

Too bad most people have less than 30 Mbit connections, many have 16 and less. It takes literal days to download 50 GB in some regions.

Church185:

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.

It will be enough for the gaming division, but will it be enough for the rest of the corporation. Them selling off their computer division hurt them quite a lot. That's just the computer division. Who knows how much it will hurt if they get rid of their film, and television business?

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.

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?

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.

I know they aren't going to doom status or anything.

I'm just kind of parodying the people that love to ring the death knell of a company at the first sign of a shitty year...although the one time they seem to be on the mark for is Capcom...yeah...they reeeeeally aren't doing so hot.

in the face of all of the Nintendoom and Nintengloom, all i have to say is, SONY DOOMED MS DOOMED!!!!! *tongue firmly planted in cheek*

gmaverick019:

Not even one post before we get some jabs from the NDF's new master chief since jeffers passed away,

Yes! Finally! I'm crowned the unofficial leader of the NDF! Where's my badge!

Dragonbums:
It will be enough for the gaming division, but will it be enough for the rest of the corporation. Them selling off their computer division hurt them quite a lot. That's just the computer division. Who knows how much it will hurt if they get rid of their film, and television business?

Man (or woman), I really hope that it saves their gaming division. Their televisions have been blown out of the water by Samsung and LG for several years, and the only thing of note their film division has made recently is Spiderman, which kind of sucks. Their computers were overpriced, though admittedly they are incredibly reliable. I have heard that the new Xperia phones are really cool, and have been selling well, but I wonder how long that will last in a market dominated by Google and Apple. I just want the games to be safe from the dead weight that the rest of the company has created. Losing Playstation, despite it's recent triumphs would be tragic (to me).

Church185:

Dragonbums:
It will be enough for the gaming division, but will it be enough for the rest of the corporation. Them selling off their computer division hurt them quite a lot. That's just the computer division. Who knows how much it will hurt if they get rid of their film, and television business?

Man (or woman), I really hope that it saves their gaming division. Their televisions have been blown out of the water by Samsung and LG for several years, and the only thing of note their film division has made recently is Spiderman, which kind of sucks. Their computers were overpriced, though admittedly they are incredibly reliable. I have heard that the new Xperia phones are really cool, and have been selling well, but I wonder how long that will last in a market dominated by Google and Apple. I just want the games to be safe from the dead weight that the rest of the company has created. Losing Playstation, despite it's recent triumphs would be tragic (to me).

I really don't think the gaming division itself would go under, but that's providing the other parts of Sony don't start using it as a min piggy bank. They do own all of it after all. But then that also means if the Sony gaming division does go down, then they are on a very thin line for generations to come in terms of consoles. Each one has to definitely turn a profit until they recoup the losses that the PS3 created.

Dragonbums:
I really don't think the gaming division itself would go under, but that's providing the other parts of Sony don't start using it as a min piggy bank. They do own all of it after all. But then that also means if the Sony gaming division does go down, then they are on a very thin line for generations to come in terms of consoles. Each one has to definitely turn a profit until they recoup the losses that the PS3 created.

The PS4 is selling incredibly fast for a system that only has a handful of games that people want to play at this point. I don't have a source on hand, but I believe it was said that each PS4 sold was sold at a $40 loss or somewhere around those lines. They said they were confident it would be easy to turn a profit because that amount would be made up with one game sale and a PS+ sub (amazing service BTW, sucks that it's kind of mandatory now). I wonder how long it will take them to make up for the PS3 black hole?

Dragonbums:

gmaverick019:

Not even one post before we get some jabs from the NDF's new master chief since jeffers passed away,

Yes! Finally! I'm crowned the unofficial leader of the NDF! Where's my badge!

A mere badge is not enough, here you are:

http://royalexhibitions.files.wordpress.com/2010/05/queen-marys-circlet.jpg

Wear it with pride.

Dragonbums:

I really don't think the gaming division itself would go under, but that's providing the other parts of Sony don't start using it as a min piggy bank. They do own all of it after all. But then that also means if the Sony gaming division does go down, then they are on a very thin line for generations to come in terms of consoles. Each one has to definitely turn a profit until they recoup the losses that the PS3 created.

That is the thing, for all of the bluster of the PS4's launch year, Sony still hasn't made that much off it if anything at all. 7 million sold isn't enough to to counteract that. Heck, I actually doubt it'll EVER recoup the losses made from the PS3 they were so big. And with all sorts of fat being trimmed with not enough divisions making bank, they're definitely not the top dog in a lot of industries they're a part of.

So Sony is doomed?.

I'd expected them selling their PC side to do some damage but I didn't expect that much to be done, Still it was better to get rid of some dead weight than it was to keep it and have bigger chances of bringing themselves down further into the red.

Also noticed some classy action going on a few posts above me, never change Escapist, keep it jabby and low witty.

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