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Recalling 9.6 million batteries could have that effect on a company's bottom line

Those who have been following the news know that Sony has seen better days. Sony revealed to investors that net income for the year will decline 35 percent to 80 billion yen (US$675 million) from a year earlier, great short of the July forecast of 130 billion yen. Operating profit will fall 62 percent to 50 billion yen (US$420.6 million) this fiscal year, while the sales forecast was kept at 8.23 trillion yen (US$69.2 billion).

Reasons cited for the dive in profits are fairly obvious. Sony CFO Nobuyuki Oneda said in this mini report that a total of 9.6 million Sony-made PC batteries which were found in Dell, Lenovo, Apple, Toshiba, Matsushita/Panasonic, Fujitsu, Sharp and Sony's own notebooks could be subject to the company's global recall. Oneda said replacing the cells will cost 51 billion yen (US$429 million).

"The cost of the recall is our best estimate," Nobuyuki Oneda told reporters. "It may rise or fall."

Other reasons behind Sony's big financial revisions came from PlayStation 3. Sony announced at the Tokyo Game Show that the 20GB variant of the PlayStation 3 would receive a 20 percent price cut even before it hit stores and that it would include an HDMI connection that was previously reserved for the more expensive 60GB version. While this was good news for consumers, to investors it meant a more costly machine to produce. PlayStation 3 sales projections were also cutback due to the delay of the European launch.

Read more about it in this Reuters article.



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Of course they leave out...
By Trisped on 10/19/2006 11:54:16 AM , Rating: 1
Of course they leave out the fact that they are only shipping 500,000 PS3 units, which means that they won't loose that money, but they won't get money from the sale of PS3 games either (not that they will have very many games out). They also leave out that Sony has been doing poorly EVERYWHERE for the last few years. In fact the only thing that kept margins up two years ago was the PS2 game sales.

Sony is in serious trouble, and unless the leader ship changes its ways, or is changed, they are headed for a short drop with a sudden stop. xp




RE: Of course they leave out...
By hannons on 10/19/2006 12:20:38 PM , Rating: 2
Even if they do sell lots of games, their profit will be lower due to using high-cost Blu-Ray media.

They could raise profits by "anonymously" auctioning thousands of the PS3s on E-bay for $1000-$2000 each.


RE: Of course they leave out...
By Trisped on 10/19/2006 12:29:13 PM , Rating: 2
I expect they could sell them for $5000 if they waited till the pre-release stuff was over and there wouldn't be any new consoles for 1-2 months.


RE: Of course they leave out...
By ViperROhb34 on 10/19/2006 1:18:13 PM , Rating: 2
They won't lose money on PS3?

They are losing about 250 per console sold.

And profit made up from games sales is made up in YEARS , not months.. AND ONLY if the console sells well enough to generate the game sales that can make up that profit.

It'll be interesting to see the report that someone digs up on how much money Sony loses in 2007 when they say "We sold 3 million PS3" ( After a net loss of 250 on each one ) ..


RE: Of course they leave out...
By Hemipower on 10/19/2006 10:48:05 PM , Rating: 1
ha, u think only 3 million ps3 in 2007?


RE: Of course they leave out...
By Trisped on 10/23/2006 3:58:58 PM , Rating: 2
Yeah, that wasn't too clear. What I meant was that since they were only shipping 500,000 units they would only lose money on that many units (if it costs them $250 on top of what they charge, then they lose 250x500,000 instead of 250x1,000,000 which is twice as much loss). While I think they are losing less then $250 in hardware costs per console, I think it is still more then they make on the sale of 3-4 games.

Also, since they don't have many consoles out, game sales will suffer. It is like having 32 tires to put on 2 cars. You can use 8 at a time, but the other 24 are just taking up shelf space.


RE: Of course they leave out...
By ani4ani on 10/19/2006 1:28:49 PM , Rating: 2
You have no idea what constitutes "serious trouble!" Despite all the issues, all of the delays, all of the bad media attention, Sony are still making a profit, and a fair size one at that.

Sony is a very powerful company, extremely well demonstrated by the fact that they still "cope" with these issues and turn a profit.

A company in serious trouble would be someone like Ford, GM or any number of airlines who are losing 100's of millions a quarter and by any proper measure are effectively insolvent! Not only that, a company in real trouble can do little to make things better or influence their predictiment. Sony have plenty of options and oportunities to correct their issues.



RE: Of course they leave out...
By Trisped on 10/23/2006 4:09:18 PM , Rating: 2
Serious trouble to me means that it is not something that will go away on its own or after a while. Yes, GM and even more so, Ford are in serious trouble. But GM is and has been working on a way out of it, so to them it is just a speed bump that they will have to slow down.

Sony is on the path to ruin. While they still command a zealous following, they don't have the quality or prices to warrant it. They cut corners, endangering people's lives and property, shipping products that don't hold up, force people who use their products into proprietary formats that cost 2-5x as much as the commonly used versions, and have poor customer service. And what is more, they don't think that is a problem.

So, you have a company, it is not doing well. It is continuing to make bad choices and lower its over all value. If things don't change, Sony is going to be going through the same thing GM and Ford are.

PS if you reply to this please take the time to not sound like a Sony PR rep. It will add credibility to your post.


RE: Of course they leave out...
By dwalton on 10/19/2006 5:31:32 PM , Rating: 2
"They also leave out that Sony has been doing poorly EVERYWHERE for the last few years. In fact the only thing that kept margins up two years ago was the PS2 game sales."

Where do you get information? If I ask you to cite your source would it be credible?

http://www.sony.net/SonyInfo/IR/financial/ar/2006/...

Sony's music and finanical division have both individually produced more profit then Sony Game division over a three year period. The drain on Sony's profit comes from its electronic division. Reality doesn't show a company who is relying solely on one division to float the boat, but one division that slowly dragging the company boat down.


RE: Of course they leave out...
By Trisped on 10/23/2006 4:20:43 PM , Rating: 2
I believe I read it from a DailyTech post before they split off from AnandTech. Where ever it was, it was a summary of Sony's press release/financial report.

And if you had read my post you would have seen that I said "In fact the only thing that kept margins up two years ago was the PS2 game sales." So posting the financial report from April 2006 would not apply or be relevant proof of your point. In fact I am sure there are very few people that don't know Sony's game division has done poorly last year because they didn't ship their PS3 in 2nd/3rd quarter like they said. Even my step dad who hates consoles, games, and only uses the computer for word processing and looking up the odd tidbit about plants knew about it and was telling my Mom.

If anything your post just proves how unstable Sony is.

And as I posted above, if you can't sound like you are not a Sony PR rep, please don't post.


RE: Of course they leave out...
By dwalton on 10/23/2006 6:29:27 PM , Rating: 2
"And if you had read my post you would have seen that I said "In fact the only thing that kept margins up two years ago was the PS2 game sales."

Look at the "Business Overview", it shows annual data for the last three years so it is relevant and its you that need to "read".

Sony's picture and financial division posted profits two years ago with it's financial division posting a bigger profit than it game division (9.3 vs. 8.7 billion yen)

"They also leave out that Sony has been doing poorly EVERYWHERE for the last few years"

The only divison to post an annual operating lost, other than electronics, is Sony's "other" division (music, network , etc.) in 2004. So, define "poorly everywhere" because just looking at Sony's financial data for the last few years it is hard to believe that anyone looking at these numbers would conclude such statement.

If you are not going to post sound facts don't post....plus if i were a sony pr person I would be more dramatic and throwing out statements of disillusionment.


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