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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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Screwing your customers
By shabodah on 10/19/2006 12:03:56 PM , Rating: 4
Does not generally increase profit. Sony go see Ford and GM about this. They could even give you advice on how to come back from it.

RE: Screwing your customers
By retrospooty on 10/19/2006 12:07:26 PM , Rating: 2
LOL... Perfect, and totally true.

RE: Screwing your customers
By FITCamaro on 10/19/2006 1:00:52 PM , Rating: 2
And how exactly does GM and Ford screw their customers?

I own a 2006 Cobalt SS 2.4L 5-speed. Great car. Put over 29,000 miles on it since I bought it late last December. Only been to the dealership once because of an engine code thrown due to me replacing the air filter with a higher flow one and it threw a lean condition flag for a second on the highway. My girlfriend also has a Cobalt. My parents have a 2002 Trans Am WS6 6-speed Collector's Edition thats only been to the dealership because the horn wasn't working quite right.

I'm not a fan of Ford but I don't think they screw people either.

RE: Screwing your customers
By BladeVenom on 10/19/2006 1:07:58 PM , Rating: 2
I believe he's refering to the low quality cars the Big Three were putting out before Japanese competition moved into the market.

RE: Screwing your customers
By retrospooty on 10/19/2006 1:53:34 PM , Rating: 5
They screw thier customers with perpetual quality problems that don't get resoved from one generation of cars to the next.

Thats great that your 2006 cobalt has only sent you to the dealer once. Wait 5 year and see how many issues you have ( I bet you go through at least 2 alternators, a starter and a fuel pump, perhaps a larger issue as well). My 2001 Integra has sent me to the Dealer zero times and it is of course over 5 years old.

As far as quality, US car companies are nowhere near Japan. Closer to a Yugo than Honda or Toyota.

RE: Screwing your customers
By TomZ on 10/19/2006 3:08:57 PM , Rating: 2
As far as quality, US car companies are nowhere near Japan. Closer to a Yugo than Honda or Toyota.

That's not factually true - actually, US brands are continuing to close the quality gap relative to Japanese brands. In fact, when you look at the top-performing manufacturing plants, a number of them are GM and Ford plants, along with their Japanese counterparts.

RE: Screwing your customers
By robber98 on 10/19/2006 4:48:54 PM , Rating: 2
Sure, US brands are continuing to close the gap. But do you realize how big the gap is? ;)

RE: Screwing your customers
By retrospooty on 10/20/2006 11:12:55 AM , Rating: 3
Yes, I have been hearing that for years... I am not sure how they rate manufacturing plants... but year after year the customer sat scores are still bad for US cars. Acura and Lexus are consitantly #1 and # 2 US cars are distant, not even close.

I am not sure what the issue is, because we CAN build reliable trucks. ??? I think the US car makers made a descision to build poor quality in. if you build a car that lasts 10 years, you have lost a customer for 10 years. ? I dunno.

RE: Screwing your customers
By mindless1 on 10/20/2006 3:30:03 PM , Rating: 2
That is utter nonsense. The average GM or Ford car does not come even close to needing all these repairs. Come to think of it, I haven't had to replace any alternators, starters or fuel pumps on any of the Ford or GM vehicles I've owned in the first 10 years.

RE: Screwing your customers
By wiiz3rd on 10/19/2006 2:51:19 PM , Rating: 2
Let me know in a couple years if you still have the same opinion.

RE: Screwing your customers
By Hemipower on 10/19/2006 10:49:23 PM , Rating: 1
this is why our economy sucks, and companies like gm have to move to mexico.

RE: Screwing your customers
By Hemipower on 10/19/2006 10:50:21 PM , Rating: 1
and it all depends on how you treat your cars! drive it hard all the time and never change the oil and see how long that acura will last you.

RE: Screwing your customers
By Samus on 10/21/2006 8:45:22 AM , Rating: 2
He's talking about the past, not the present. GM doesn't have a business opportunity to screw you on your new 2006 Cobalt because these day's that'd be the nail in the coffin for GM.

RE: Screwing your customers
By shabodah on 12/4/2006 4:06:03 PM , Rating: 2
I am most definately talking about the past. Although the perception isn't there yet, the fact of the matter is today, Ford and GM make some of the best vehicles you can buy for the money. That's why I tagged the whole "and come back from it" line on there afterall, lol. (2004 Saturn Ion Redline) :)

RE: Screwing your customers
By TomZ on 10/19/2006 3:04:03 PM , Rating: 2
While it is a fact that GM and Ford have generally had lower quality than their Japanese counterparts, I would hardly characterize that as "screwing their customers." It is more accurate to say that Toyota and Honda generally make better products, and as such should be priced higher in the marketplace (as they are). And this causes a financial problem for GM and Ford since their cost structures are out of whack, mainly due to the burdens associated with unionized labor and their internal inefficiencies.

Also, you are actually wrong twice, since you presume that Ford and GM have figured out a strategy to recover from their current problems. This is actually not the case.

RE: Screwing your customers
By robber98 on 10/19/2006 4:51:43 PM , Rating: 2
Remember Ford attempted to cover-up their mistake few years ago? That's how they treat their customer...

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?

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 if i were a sony pr person I would be more dramatic and throwing out statements of disillusionment.

$69.2 trillion?
By sxr7171 on 10/19/2006 12:15:59 PM , Rating: 4
$69.2 trillion? Sounds like more than world's combined total GDP.

RE: $69.2 trillion?
By nomagic on 10/19/2006 12:24:27 PM , Rating: 2
[Sarcasm on]
You didnt notice? Sony owns the planet!!!
[Sarcasm off]

Well, because i am bored and need a life or get laid, I used a calculator. I found that trillion is a typo and should have been billion...

Stupid Decisions
By TimberJon on 10/19/2006 12:06:46 PM , Rating: 2
Whoever the higher ups are, theyre messing up bad.

Money money money! Someone is hungry.

Customer service is terrible with everything, and the Lithium Ion battery problem is not a great item in their history book either.

I wont buy a Sony product that doesnt get good reviews from various benchmark people, or that would ever need technical support. I.E., A damn sony laptop!

RE: Stupid Decisions
By anilpassi on 10/19/2006 3:27:18 PM , Rating: 2
Well, there was a time I wouldn't buy anything but Sony.
And that time continues...except for Cannon Camera and except for iPod, and except for my XDA-Exec Mobile, and except for my Dell Laptop and of course except for my Toshiba DVD Player and except for my Panasonic Camcorder....all my other remaining gadgets are/is Sony....and it is indeed the Sony Television.

Had I not purchased my Flat screen CRT 3 Yrs ago, I would have be sonyless by now, as its hard to justify paying premium for Sony these days !

Anil Passi

By hannons on 10/19/2006 12:15:13 PM , Rating: 4
was kept at 8.23 trillion yen (US$69.2 trillion).

Should be US$69.2 billion.

By daftrok on 10/19/2006 3:31:46 PM , Rating: 1
Yay! HP did not fall into the thorny, exploding battery bush! And no reports for Gateway or Alienware too. Unless anyone has heard anything about that...

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