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[fritolay]

I wonder how much their current financial situation is affecting 1st party development. Maybe this is why we have had such strange news post PS4 launch with their studios.

 

[Longsword]

Critically, the core business is actually marginally profitable and they decreased their net indebtedness by around $500m over the year and increased their revolving finance facilities to over $7bn (access to money if they need it, Moody's am cry). A lot of the losses over the last few years have been paper losses, asset impairments, DTA write downs and such. What that means is money either spent in the past or in the case of a DTA, the asset taken on for tax losses carried forwards, are now being written off as they are not going to get that money back. They spent the money, previously and now they won't get it back through their normal operations.

It is a huge difference to a company that actually loses money outright where their normal operations cost more than the revenue they generate from sales. Nintendo are in this category which is why their situation seems worse than Sony's and they don't really have a clear path to recovery like Sony (getting rid of the TV division) because their problems stem from deeper issues such as smartphones killing their handheld business and being stupidly uncompetitive in the home console market.

For all their current faults, Sony still have a profitable smartphones division, a hugely profitable financial services division, their content division (pictures+music) reliably makes $1bn per year in operating profit and their games division seems to be recovering very nicely after the PS3 caused so much turmoil. In essence if they jettison the TV division they would be pretty healthy and though they would hold a significant amount of debt but they would be profitable, more than enough to redeem bonds and meet their financial obligations. I guess the issue is that it has cost Sony $1.7bn to exit PCs and I expect the cost of exiting TVs would be double because all 30,000 employees would need paying off and the losses on current stock and contracts would need to be written off.

Essentially, though it is true they lose money, a lot of it is on paper, and the core business is generating cash.

Thank you for the overview!

Would you happen to know how much did the sale of the buildings affect the results? Were they added to the core business or were they calculated separately. I see that they sold them form 2.2 billion, so I presume these numbers would be uglier without them?

 

[Nightengale]

I wonder how much their current financial situation is affecting 1st party development. Maybe this is why we have had such strange news post PS4 launch with their studios.

That depends on CAPEX allocations.

The reality though, is that 1st-party studios are still well-staffed, and are still hiring in the critical ones. It's only SSM right now that seems to be in a weird limbo, they don't seem to be hiring much compared to the other big studios.

 

[Lexxism]

Unbelievable. When are these guys going to finally fire Iwata?

Perfect.

 

[DragonKnight]

Doomed?

 

[Celine]

Wonder if Sony can turn around.

We have accurate figures now:

2011/12 - 29bn yen operating profit.
2012/13 - 1.7bn yen operating profit.
2013/14 - (8.1bn) yen operating loss.

Sony have restated some of their historical obfuscations. That graph can be reasonably updated now with these figures as they are, to my knowledge, accurate and represent the games+SEN division only.

Interesting, didn't know that.

 

[Road]

Network Services is SEN/PSN, a core part of the games business. It is all part and parcel of delivering games content. PS Now investment will be what is causing the losses for that segment. It should be included for the purposes of the graph as PS+ sub fees are probably recorded in that division.

I don't think it's PSN because sales of networked software was already included before.

I was thinking SEN, yes, but the music and video unlimited kind of waste, which is not gaming.

Didn't remember PSNow. That might've been in NS before, yes.

 

[jcm]

PS3 is deteriorating much more quickly than I expected. That thing was a loser from end to end.

 

[Baki]

Sure, they will all buy Samsung and LG...



The PC division is set to lose another 80-90bn yen in the coming year with very little income from it (almost none). That wipes out their profits and then some. Other than that it is the same issues as before. Sony are still paying too much tax, their costs are still too high, and they are involved in far too many commodity markets.



Nothing to report really, without knowing the mix of the 17m units they expect to sell over the coming year passing any kind of judgement is tough. I have it down as 4m PS3 and 13m PS4, but it could be different. I also think 17m is a conservative estimate, I think after years of downgrading forecasts they want to give some upside throughout the year. 17m is still a decent YoY increase and a good starting base for them.

Profitability should return as they ramp up network services, that they have included SEN in the division name is a good sign.

The hardware forecast also means there is little to no chance of a PS3 price cut this year unless they expect fewer than 10m PS4 sales.

Vita = dead.

Have they officially offloaded the PC division ? Are they going to get rid of TVs?

 

[anotherVegan]

Sony is doomed?

 

[shinra-bansho]

Thank you for the overview!

Would you happen to know how much did the sale of the buildings affect the results? Were they added to the core business or were they calculated separately. I see that they sold them form 2.2 billion, so I presume these numbers would be uglier without them?

There are no building sales gains booked in the last fiscal year that I recall.

The sale of the Gotenyama premises is for the next (2015) fiscal year. The sale of the Madison Avenue building and the Tokyo office building were in the prior (2013) fiscal year.

 

[spwolf]

Have they officially offloaded the PC division ? Are they going to get rid of TVs?

they already sold Vaio PC division, it is why they have such operating loss... $800-$900 million for selling off in 2013 and plus the same in 2014.

 

[zhao3gold]

Why don't we just discuss how many Sony products we purchased in the past few years except Playstation?

And then, we will understand why Sony was/is/will be in trouble.

 

[Y2Kev]

It's pretty disappointing they continue to have to state so much in paper/non-cash losses. The restructuring effort is taking too long and costing too much. EBITDA looks healthier and I believe, just from doing super quick math, they have positive FCF.

They need to really make some decisive moves around restructuring. And I'm also tired of seeing their core business impaired due to shitty stuff happening. Battery impairment. Smh.

 

[offshore]

Sony have been restructuring since at least 1999.

You'd think they'd have gotten it right by now. lol.

 

[FullMetalx117]

For the TV business Sony should either stick to incredibly high end (4K, top of the line, smart, etc.) or go cheap. I really think it's the mid rang TVs that's killing them.

 

[prag16]

17 million consoles and 3.5 million handhelds sounds a bit aggressive, no?

The PS3 has dropped off a cliff and PSP and Vjta (in the west) are almost nonexistent..

 

[IncandescentPrecept]

PS3 is deteriorating much more quickly than I expected. That thing was a loser from end to end.

We don't know how many PS3s were sold though, right? Plus, it's still too expensive for the secondary markets.

 

[ReBurn]

Sony is doomed?

Everyone is doomed. Depends on the thread.

 

[TMaakkonen]

Even without the PC software impairment of 6.2 billion yen, Game business would still have lost 1.9 billion yen.

Tired of rolling my eyes at Sony restructuring segments again.

I don't know what the hell "Network Services" they're including with Game are, but I know they''re not a good thing.

Game operating income

FY2013
without NS: -8.1 bn
with NS: -18.8 bn
negative impact of 10.7 billion yen

FY2012
without NS: +1.7 bn
with NS: -3.7 bn
negative impact of 5.4 billion yen

Some terribly lossy operation.

And the old style:

More charts will be difficult until Sony start reporting Game separately again. =\

So unless straight forward math doesnt actually work here, hasnt game division been overall profitable all these years? Or is there something that should be counted on losses?

And on that note it seems that during the next few years Sony should be able to get a profit since currently it looks like PS4 is making profit similiary to PS1 and PS2 debuting years.

And personally, if Sony would have to spin-off/sell any divisions, gaming could actually be the one division that survives to the end. Besides financial services of course.

 

[Riki]

Unbelievable. When are these guys going to finally fire Iwata?

Bingo.
Funny that we aren't seeing tons of articles declaring the end of Sony.
Hopefully they can get their shit together soon but I don't have any faith.

 

[TechnicPuppet]

I'm just happy their games division is doing well and also that it isn't propping up other parts of the company. I think the financial services bit is doing all the propping up.

 

[Road]

No webm.

 

[Y2Kev]

Bingo.
Funny that we aren't seeing tons of articles declaring the end of Sony.
Hopefully they can get their shit together soon but I don't have any faith.

1) you are seeing negative articles and reporting in the Real Adult financial press. It's the top story in the WSJ this morning.

This also came out overnight. So you gave the games press exactly 0 time to even get the factory rolling. That's genuine.

2) the games press, like most gamers, is not trained at reading and reporting financial news. So asking why you don't see reporting calling for the end of Sony is like asking why you don't see articles asking where the sun went overnight. Eventually people learn they don't get it.

What's your point?

 

[TitusGroan]

Guys, let's not turn this into a Nintendo vs Sony argument about who can doom harder. Both companies have got financial issues they need to address. No need to devolve this into a Kaz/Iwata popularity contest.

 

[Riki]

1) you are seeing negative articles and reporting in the Real Adult financial press. It's the top story in the WSJ this morning.

2) the games press, like most gamers, is not trained at reading and reporting financial news. So asking why you don't see reporting calling for the end of Sony is like asking why you don't see articles asking where the sun went overnight. Eventually people learn they don't get it.

What's your point?

That Sony is in real trouble but it seems mostly glossed over by gamers and the gaming press.
Unless I'm missing the thread where people think they can run the company better like with MS and Nintendo?

 

[Y2Kev]

Yeah, you gave the games press exactly how much time to react to this news?

 

[spwolf]

It's pretty disappointing they continue to have to state so much in paper/non-cash losses. The restructuring effort is taking too long and costing too much. EBITDA looks healthier and I believe, just from doing super quick math, they have positive FCF.

They need to really make some decisive moves around restructuring. And I'm also tired of seeing their core business impaired due to shitty stuff happening. Battery impairment. Smh.

as much as I could see quickly, $1.66 billion positive cash flow.

 

[Riki]

Yeah, you gave the games press exactly how much time to react to this news?

We shall see.

 

[KillerMan91]

17 million consoles and 3.5 million handhelds sounds a bit aggressive, no?

The PS3 has dropped off a cliff and PSP and Vjta (in the west) are almost nonexistent..

Handhelds: 1.5 million for Vita in Japan + 1 million elsewhere + 1 million PSPs for developing world. Don't think that is too aggressive

Consoles: 5-6 million PS3s and 11-12 million PS4s. I don't think that is too aggressive either with holiday spike for PS4. Even PS3 did over 13 million during its peak year and PS4 is market leader.

 

[IncandescentPrecept]

As long as the gaming division is doing well, all is well.

 

[Road]

Handhelds: 1.5 million for Vita in Japan + 1 million elsewhere + 1 million PSPs for developing world. Don't think that is too aggressive

Consoles: 5-6 million PS3s and 11-12 million PS4s. I don't think that is too aggressive either with holiday spike for PS4. Even PS3 did over 13 million during its peak year and PS4 is market leader.

More like 13-14 million PS4 and 4-3 million PS3.

Last gen is dead.

 

[EagleEyes]

I know overall that Microsoft as a company made a profit but did any of the big three platform holders actually make money in the videogame business last fiscal year?

 

[lightzGamin]

I'd rather see Sony die trying than sell their TV division. I will never buy any TV that is not sony.

 

[maabus1999]

It's pretty disappointing they continue to have to state so much in paper/non-cash losses. The restructuring effort is taking too long and costing too much. EBITDA looks healthier and I believe, just from doing super quick math, they have positive FCF.

They need to really make some decisive moves around restructuring. And I'm also tired of seeing their core business impaired due to shitty stuff happening. Battery impairment. Smh.

Hard to equate how much of the core business is improving since the Yen exchange for Sony's FY 2013 was the most favorable for Japanese companies in the past five years. Sony acknowledged that in their earnings report. If the Yen starts to strengthen again before Sony finishes its every lasting restructuring plans, margins and FCF will feel some pressure.

 

[KillerMan91]

More like 13-14 million PS4 and 4-3 million PS3.

Last gen is dead.

Well I kinda assumed that this is the year they start fire sale with PS3s during the fall especially if the news about new CELL shrinkage are true. That should give it small boost in developed countries and probably bigger boost in developing word it they finally will get the price down. Sure it could go like in your numbers but I don't think that even 14 million is impossible for PS4. Wii and PS2 had those 20m plus years so surely market leader this gen could push 14 million.

 

[zomgbbqftw]

It's pretty disappointing they continue to have to state so much in paper/non-cash losses. The restructuring effort is taking too long and costing too much. EBITDA looks healthier and I believe, just from doing super quick math, they have positive FCF.

They need to really make some decisive moves around restructuring. And I'm also tired of seeing their core business impaired due to shitty stuff happening. Battery impairment. Smh.

Yes, positive cash flow. Around $500m positive as I calculate it. Not a completely terrible result, but Kaz needs to be faster and more ruthless with the restructuring. I did an exercise a couple of years ago which I've been trying to dig up about the price Sony by could have sold their legacy businesses, PC and TV, for in 2012.

I believe they have kept the battery division because of a significant technical break through and new opportunities in EVs.

 

[Ludicrous Speed]

The game division lost $78M? Shit, how is that possible? What was driving this? The Vita????

 

[PetriP-TNT]

I'd rather see Sony die trying than sell their TV division. I will never buy any TV that is not sony.

Aren't they spinning it off already anyway

 

[KillerMan91]

The game division lost $78M? Shit, how is that possible? What was driving this? The Vita????

Launching a new hardware is not cheap. They lost money during launch years of PS1, PS2 and PS3 too

 

[coldfoot]

When you take out the PC losses and the one-time PC division selloff charges, the Mobile division (phones and tablets) actually made money, which bodes well for Sony, since there won't be a PC division next time.
Game division is pretty much even, most of the loss (60M out of 78M) is due to Sony Online Entertainment, and not Playstation, and launch is the least profitable part in a console's lifecycle.
You thirsted for PS4's, Sony made them in large quantities employing more expensive labor than they normally would once the supply/demand for the PS4 stabilizes.

 

[Vashetti]

R&D likely went into making the PS3 even slimmer too. 22nm Cell is on the cards to be released this year.

I think the launch of the final, slimmest PS3 model will coincide with a pricedrop and this will bring sales back up.

 

[Nightengale]

Bingo.
Funny that we aren't seeing tons of articles declaring the end of Sony.
Hopefully they can get their shit together soon but I don't have any faith.

Sony's in bad shape, but declarations of Sony's end is terribly premature.

We're far more likely to see a completely different Sony reborn from the ashes of the electronics giant than we are seeing Sony 'ended.'

 

[Ludicrous Speed]

Launching a new hardware is not cheap. They lost money during launch years of PS1, PS2 and PS3 too

Makes sense. So we should see some nice profits soon. Real soon.

 

[BriareosGAF]

No webm.

Very nice, thanks for the data and graphs.

 

[Phil4000]

Hope Sony can turn things around, I would hate to see their TV, and console business go belly up

Maybe their PlayStation business can be spun off as a separate entity if everything goes south...

 

[muyricosuave]

Does Sony have a pool of funds like Nintendo that these losses come out of, or is Sony in debt?

Both aont leverages debt they are both in crazy debt and have something like 10bil in cash and cash like assets.

 

[Mainstreamer(1up)]

Those microtransactions that Sony is trying to push on games like GT6 and the Driveclub model are going to be more important for Sony going on. They need to make a bigger return on these games as they get more expensive to make, selling a couple of million of games isn't going to cut it anymore in the revenue department.

 

[breakfuss]

Hope Sony can turn things around, I would hate to see their TV, and console business go belly up

Maybe their PlayStation business can be spun off as a separate entity if everything goes south...

Could Playstation even exist in its current form with out the rest of the company?

 

[lensoftruth]

Bingo.
Funny that we aren't seeing tons of articles declaring the end of Sony.
Hopefully they can get their shit together soon but I don't have any faith.

That's because everyone seems to think Nintendo is a tiny little company with no money. It's hilarious