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Sony sees its biggest quarterly loss in four years

Sony saw its quarterly losses grow for the fourth fiscal quarter (January 2007 to March 2007). Not surprisingly, the company cited that its overall $563 million USD loss – the company’s biggest quarterly loss in four years -- can be directly attributed to costs associated with the PlayStation 3 console. The company’s Games division witnessed a $1.9 billion USD loss.

"In the Game segment, there was a significant operating loss as a result of the sale of PS3 at strategic price points lower than its production cost during the introductory period," said the company.

The PS3 comes packed with plenty of technology including the complex Cell processor, Blu-ray drive, integrated 60GB HDD, WiFi and Bluetooth. In mid-November, iSuppli estimated that Sony was losing $240 USD on each 60GB PS3 it sold and $300 USD on each 20GB PS3 that it sold. Sony was able to stem those losses somewhat by dropping the 20GB PS3 from its product mix in North America.

Sony expects that it will continue to lose money on the PS3 for the current fiscal year. That being said, the company expects to ship 11 million PS3s for the current fiscal year -- up from 5.5 million units for the previous fiscal year. "The PS3 business will really get off the ground this fiscal year," said Sony Corporate Executive Officer Nobuyuki Oneda.

Sony isn't the only company seeing losses from its gaming division. Microsoft's Entertainment and Devices Division (EDD) which encompasses the Zune and Xbox 360 witnessed an operating loss of $315 million USD for its fiscal third quarter. Microsoft's Robbie Bach notes that the Xbox 360 hardware itself may never end up being profitable for the company, but it plans to make money on peripherals, royalties from game publishers and its Xbox Live online service.

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Sony spouting more crap
By Alexstarfire on 5/16/2007 1:40:36 PM , Rating: 1
They say they shipped 5.5 millions PS3s last fiscal year yet according to they have only sold a little over 3 million. I know the number isn't exact, and I believe it's only for North America, but if the US only purchased that many then how many do they think the rest of the world purchased. It bombed in Japan, not even selling out, and the population of Europe isn't even as big the the population of the US, I believe. They sold the most in the US by far, then Europe, then the rest of the world. Even if that number is somehow accurate they are just puffing smoke up their ass if they think they will ship 11 million PS3s next fiscal year. Hell even Microsoft hasn't shipped that many in one year, and they've been out longer. The Wii is the only one likely to hit that kind of number, and I think even that is a long shot.

Also, even if they did hit that number that only means one thing, more money loss for them. Either way it's looking bad.

RE: Sony spouting more crap
By Oregonian2 on 5/16/2007 1:43:14 PM , Rating: 2
What's the end points of their fiscal year?

RE: Sony spouting more crap
By jpeyton on 5/16/2007 4:17:14 PM , Rating: 6
From the latest available sales data for the US and Japan:

The Sony PS3 is selling 50,000 units per month in Japan, and 130,000 per month in the US. Total worldwide sales stand at around 3.2 million units.

By comparison, the XBOX 360 is selling 12,000 per month in Japan and 200,000 per month in the US. Total worldwide sales stand at around 10.2 million units.

The Nintendo Wii is selling 400,000 per month in Japan, and 260,000 per month in the US. Total worldwide sales stand at around 7.07 million units.

RE: Sony spouting more crap
By Zelvek on 5/17/2007 12:02:30 PM , Rating: 4
where did you get those numbers from? I'm not saying their wrong (they look right to me) but I would like your source.

By therealnickdanger on 5/17/2007 6:46:27 PM , Rating: 2
Agreed, they sound right, but a source would be nice. Especially with a 6-rating... ;-)

RE: Sony spouting more crap
By golfjam on 5/16/2007 5:36:50 PM , Rating: 3
I don't care about these stupid numbers of who is winning or losing the console wars. I want good games that's all!
I have a XBOX 360 because of Gears of War and luckily they still have other quality titles available. Wish I had a Wii but I can't find one. Why?? Because it's fun. And I will buy a PS3 when they release Metal Gear Solid or Gran Turismo or Final Fantasy. And finally, I'll get a DirectX10 card when they release Crysis (can't wait for this one!).
I've read a lot of silly stuff on DT and don't understand why everybody is waiting for a winner. What for? Let Microsoft and Sony loose as much money as they can afford, the consumer should win after all.

RE: Sony spouting more crap
By AntDX316 on 5/18/2007 3:53:15 AM , Rating: 2
why would sony keep selling products that make them lose alot money?

RE: Sony spouting more crap
By Screwballl on 5/16/2007 1:47:30 PM , Rating: 2
If they can get the parts cheaper but keep the sale price the same then they have a better chance of not losing as much money. Nintendo doesn't have the whole company monetary overhead that MS and Sony has so they have to play it safe. Luckily they released a fun console for all age rather than targeting a specific older crowd.

RE: Sony spouting more crap
By AmpedSilence on 5/16/2007 1:58:41 PM , Rating: 3
shipping a console is not the same thing as selling one. Its completely possible for them to "ship" 11 million consoles. so what if 6 million are sitting on shelves in stores; they can still say that shipped 11 million units.

Those words really shouldn't used interchangably

RE: Sony spouting more crap
By theflux on 5/16/2007 6:24:37 PM , Rating: 3
Except that to Sony and Microsoft a shipped console is a sold one. They don't give the consoles to the retailers and then make money when someone actually buys it. The retailer buys it from them, so the console is sold. A true figure is sold-to-consumer which only Nintendo uses. Microsoft and Sony are both guilty of using shipped and sold interchangeably and are both guilty of channel stuffing.

RE: Sony spouting more crap
By AndreasM on 5/16/2007 2:04:22 PM , Rating: 3
The EU has 494 million citizens.

RE: Sony spouting more crap
By mrteddyears on 5/17/2007 4:31:16 AM , Rating: 2
Most of them heading to the UK :-)

RE: Sony spouting more crap
By michal1980 on 5/16/07, Rating: -1
RE: Sony spouting more crap
By noxipoo on 5/16/2007 5:25:57 PM , Rating: 2
do you have any idea what a fiscal year means? or when it even starts or ends for sony?

RE: Sony spouting more crap
By MrTeal on 5/16/2007 7:39:16 PM , Rating: 2
Sony saw its quarterly losses grow for the fourth fiscal quarter (January 2007 to March 2007).

Seeing as how last time I checked there were 4 quarters in a year, it would seems that Sony's fiscal year runs April to March and the poster above you was correct.

RE: Sony spouting more crap
By encryptkeeper on 5/17/2007 9:36:12 AM , Rating: 2
LOL so I see you've finally met michal1980...and yes we all hate him here.

RE: Sony spouting more crap
By smitty3268 on 5/16/2007 3:03:27 PM , Rating: 2
and the population of Europe isn't even as big the the population of the US, I believe

Actually, Europe has almost twice as many people as the US does. Although the ones in Eastern Europe might not have enough money to buy tons of consoles - I'm not sure how the number of poor compares. It also launched quite a bit later in Europe as well so I imagine sales are a lot lower than in the US.

RE: Sony spouting more crap
By OxBow on 5/16/2007 3:34:51 PM , Rating: 3
Stop trying to spin something you know nothing about. SCE is hemoraging money right now, right in line with their predictions to do what? Lose lots of money. They won't see profitability for a while, but they told their investors that years ago. The question is, can they hit their projections for revenue and loss or not. Most serious investors want to see them come in on target. Losses that are greater than expected aren't good, but neither are extra revenues. The success of the Wii, while good for Nintendo's revenue, shows to many analysts that they were caught off guard and didn't plan appropriately. That shows lack of management foresight which is very troubling.

This is not to say that Sony isn't in a tough spot, just that your reasoning is flawed. Sony is trying to push the PS3 right now. They don't have many titles out to lure new sales or justify the purchase, they lose money on each console, and all their capitol is being invested in projects that won't post until the next year. If they can weather this drought of revenue, they'll eventually come through in a stronger position. As such, they just need to focus on the task at hand, sell consoles, talk about the future, and keep working on cutting overhead while developing new content. Easier said than done, but that's their real position.

RE: Sony spouting more crap
By cubby1223 on 5/16/2007 4:34:27 PM , Rating: 1
Sony's not doing that bad. It's all spin on numbers. This is what the shareholders enjoy:

RE: Sony spouting more crap
By akugami on 5/16/2007 5:08:16 PM , Rating: 5
While Sony stock isn't bad at the moment, the problem is that it's financials aren't looking too hot. Let's face it, considering how much money it has in debt and how much it's making, these huge losses are troubling because a lot of it depends on Blu-Ray and/or the PS3 being successful.

Long term, the PS2 will begin to peter out as gamers, even casual ones, begin to move to the newer systems. This is probably 2-3 years out before it really becomes noticeable. What is troubling is not the fact that the PS2 will eventually die, as most product lines do, especially in tech related industries. The problem is that the PS3 is not doing as well as it's expected to. How bad is it? It's not even hitting the modest scaled back expectations of Sony.

And truthfully, anyone with the slightest bit of objectivity can see that the PS3 at this point has a huge uphill battle against the Xbox 360 in Europe and the USA as well as having to battle the immensely popular Wii in Japan, USA and Europe.

Early success begets later success. While the PS1 got off to a slow start, it's competition at the time (Nintendo and Sega) were shooting themselves in the foot. And when the PS2 came out, it rode the popularity wave of the Playstation brand name to success. Not to mention the Xbox as well as Gamecube came out much later than it. The Dreamcast, a great system, unfortunately bombed. The PS3 is off to a very slow start and is facing very stiff competition. And IMHO, without a significant price drop (60GB down to $400 USD) or at least 3-4 stellar must have games in it's lineup near the Christmas shopping season, I simply don't see how it can improve it's status to any large degree.

Simply put, Sony tried to include the kitchen sink into the PS3 when it should have focused (much like Microsoft and Nintendo) into making a great games console. That kitchen sink may well an anchor around Sony's neck.

Sony won't fold because of the PS3 failing but it will affect the overall company badly. Sony's computer entertainment division has been where much of it's profits have come from in recent years, often propping up it's other consumer electronics. If that starts reporting large losses every quarter...

RE: Sony spouting more crap
By cubby1223 on 5/16/07, Rating: -1
RE: Sony spouting more crap
By OxBow on 5/17/2007 2:22:19 PM , Rating: 2
I think you're reading more spin and meme's into this than the actual sales performance. The reality of the PS3 sales is that they did better in sales than expected. In the first three months on the market, the PS3 sold more than 53,000 more units than the 360 did over it's first three months, and that was at a higher price point with stiff competition. In spite of all the posts, blogs and ravings, the actual numbers they are posting are actually quite good.

The PS2 continues to sell well and will keep up a strong head of steam through 2007. By 2008 the PS3 will have streamlined it's manufacturing costs, cut it's price down and will begin to emerge as a solid product with a good amount of value in titles and services, including movies, games and online content. I expect to see continued losses for Sony through the second quarter of 2008, although those losses a year from now will be significantly less. At that point Sony should start to show a strong performance and begin to make a return on it's investment.

In general the average life of a console is 5 years. With nearly simultaneous launches, the Wii and PS3 started out on radically different profit vectors. The Wii, profitable basically from Day 1, will continue to sell well through this year and into 2008. In 2008 everyone expect Wii sales to begin to stagnate and drop off, idling along for a fair while until Nintendo comes out with something else. Sony wants the PS3 to sell well for the next 7-8 years. To create a product with that amount of momentum takes time. If they had shot out of the gate as quickly as the Wii, they certainly would tripped fatally. As it was, it took a fair amount of pain and suffering to get moving. The PS3 is still gaining momentum while the Wii is start to loose theirs.

I'd liken it to a locomotive versus a semi-truck. Both can go the distance and deliver the goods. The locomotive can deliver a lot more than the Semi, however, it takes that locomotive a lot longer to get going and it's not a pretty picture getting started. The Semi can get started quick, and might even be able to make two or three trips in the time it takes the train to get there, but the train will still end up delivering more. Do we still need both Semi's and Trains, sure, they do different things. The same holds true for the PS3 and Wii. I'd look at the 360 as another locomotive with fewer cars on a different schedule. It'll still deliver more than the Semi's, since it started earlier, and since it has fewer cars, it'll get up to speed quicker, but it still won't deliver as much as the PS3 train nor will be as fast to destination as the Wii.

RE: Sony spouting more crap
By iNGEN on 5/16/2007 5:46:56 PM , Rating: 2
A P/E over 55! Talk about speculative valuation. Something tells me Warren Buffett wouldn't be interested in Sony!

RE: Sony spouting more crap
By cubby1223 on 5/16/2007 5:58:48 PM , Rating: 1
Probably. But from reading other forums, reports like this one usually spurs comments about how stockholders are going to be outraged and demand changes & such. When they're certainly happy for the short term.

RE: Sony spouting more crap
By mcnabney on 5/16/2007 11:35:01 PM , Rating: 2
and the population of Europe isn't even as big the the population of the US

Ah, no. There are almost 500 million people in Euroland.

What isn't mentioned is Sony's bright idea of selling the PS3 as a cheap BluRay player. Not such a smart idea if half of their sales are for people that won't buy any games.

RE: Sony spouting more crap
By akugami on 5/17/2007 1:08:21 AM , Rating: 2
If the cost of blue laser diodes had been significantly cheaper and there was no shortage of said diodes it would have been a brilliant idea. I truly think that Sony should have not included Blu-Ray in the PS3 and it might wind up helping to kill the PS3, but at the same time, this inclusion may wind up giving Blu-Ray the boost it needs to beat HD DVD.

I really think the PS3 shortage at the holiday shopping seasons hurt it and when the parts shortage eased, Sony found itself with the highest costing games console but having missed out on the lucrative shopping season when people are more willing to spend money.

It's too early to tell if Blu-Ray will ultimately succeed but early indications are the free Blu-Ray movies along with the inclusion of Blu-Ray is giving it a slight edge over HD DVD in the early goings of the hi-definition format wars.

I'm not sorry to see the PS3 flounder. I'm against such high priced games consoles. And I'm speaking as someone who owned a Neo Geo back in the day. And no I'm not a fanboy as I have a PS1 (more than one) a PS2 (more than one) and a single PSP in the house.

I still do think the Wii should have included better graphics capabilities. I don't think anyone would balk at a $300 Wii...considering how it's flying off the shelves. I do agree that graphics are not the be-all end all and I know the Wii is graphically superior (even if only slightly) to the Gamecube. I just wish it was a tad better in that department. Doesn't need to be PS3 or Xbox 360 level, but something a tad better. I'm sure that's in the works for Wii 2.0 along with enhanced motion sensitivity.

By NoSoftwarePatents on 5/17/2007 2:02:34 AM , Rating: 2
The NeoGeo had expensive games because they were clones of the MVS ROM carts. The Sony PS/3 just has expensive hardware and cheap games by comparison.

You are comparing apples with oranges. The NeoGeo was an enthusiast console for people who were willing to pay for the true arcade experience in the 10+ years in it's existence right up to "Samurai Spirits Go." The Sony PS/3 is a consumer device.

Not selling PS3 at loss !
By shady3005 on 5/16/2007 3:19:36 PM , Rating: 2
Atleast here in INDIA where the retail price is Rs. 40,000 i.e. around 1000US$ . They are making a healthy profit at this price but then this is much more than average monthly income of most households.

There would be only few takers at this price. Rich Kids ,Big Actors and Cricketers :P

The Loses are actually decreasing.
By Darthefe on 5/17/2007 2:12:35 AM , Rating: 2
Did u guys ever realize that sony is only making loses in NA and Japan and some other parts of the world in Europe they no profit or loss. If u dont believe me the cost for the PS3 is 840 with the EE+GS. In Europe the price is 599 Euro, which is 810$ since the PAL version does does not have EE+GS, -30$ so know 810$ so in europe they dont make any loss. But in the futre i think from the article i read where it said that in the Q3 the Blu-ray diode price is going to go down by a 100$ and EE+GS going to be removed in US and Japan which is -130$ so the price for the making of PS3 should be 710$ and if the prices of the other parts e.g. GPU which is 125$ and the Cell which is 89$, then if sony was smart they could put a price drop by a 100$ at least temporarly for the holiday season with all the good games which will be there sony should sell lots of Units

By encryptkeeper on 5/17/2007 9:42:41 AM , Rating: 2
Sony isn't the only company seeing losses from its gaming division. Microsoft's Entertainment and Devices Division (EDD) which encompasses the Zune and Xbox 360 witnessed an operating loss of $315 million USD for its fiscal third quarter.

Oh, ok. That includes the Zune. No wonder it's losing money. That thing is a complete flop. And if you don't believe me, what is it, 100 million Ipods have shipped? Something like that?

LOL I love DT
By elmikethemike on 5/17/2007 1:27:25 PM , Rating: 2
Chalk up another anti-Sony article Daily Tech. Good job!

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