Support NeoGAF

[SouthernDragon]

It'd be my luck that I finally choose to get a Sony product (PS3) and they go tits up.

Here's hoping that their stupid proprietary bullshit goes away; it's largely what keeps me away from their cameras and the like.

 

[soul creator]

I was a gaffer at the time of the Dreamcast death...but strangely enough I don't remember much.

I suppress painful memories as well

 

[Jamesfrom818]

Bye VAIO

 

[Opiate]

sounds like a problem with society, not a problem with analysts and investors.

It goes both ways. They may be too conservative, we may be too liberal.

The upside to our approach is that adaptation to hostile environments is easier: if things go sour, you can jettison the under performing sectors of your company. Everyone expects this.

The upside of their approach is loyalty. I mean, our companies say things like "we are a family here" or "we care about you," but generally we know that's all just corporate speak and often disregard it. Wherever they may be located, it is generally assumed in a conservative corporate environment that the company really will try very hard to avoid layoffs and reward loyal employees. This has effects like increasing employee loyalty (they rarely leave even if they find a job that pays better) and productivity.

To repeat: the conservative Japanese approach is that you aren't supposed to bleed money in the first place, as your employees are productive, efficient, and loyal. If you're bleeding money and you're abundantly loyal to your employees... that's a problem, yes. That's the worst of both worlds.

 

[The_Inquisitor]

It'd be my luck that I finally choose to get a Sony product (PS3) and they go tits up.

Here's hoping that their stupid proprietary bullshit goes away; it's largely what keeps me away from their cameras and the like.

The PS3 was a nice step in the more open direction. Well the early ones at least. I enjoy having a CF and SD card reader immensely.

 

[Raistlin]

Same old song and dance.

Not exactly. Sony's actually laying off tons of people as well as killing off product lines ... it's no longer simply talk of reorganization.

The problem is that many analysts feel it may be too late.

 

[tak]

I hope this doesn't hurt their product quality. Their electronic products have always lasted me for years.

 

[Opiate]

Not exactly. Sony's actually laying off tons of people as well as killing off product lines ... it's no longer simply talk of reorganization.

The problem is that many analysts feel it may be too late.

I'm not sure you'll take my word for it, Onix, but I do follow the business world very studiously, and I think it's safe to say that genuine bankruptcy is out of the question for Sony. It is likely, however, that significant and dramatic reorganization may be in the works, with major divisions seeing liquidation or overhaul.

 

[tak]

You're acting as if slashing and burning isn't a common corporate practice.

If this situation is anywhere near as bad as it's being made out to be, then Sony 's going to have to cut deep. If that's the case who knows where they'll cut from.

I'm sure Sony would sacrifice other divisions before going for the Playstation brand. The Playstation brand has a lot of value to it.

I have feeling their computer division might be the first to go if they do start killing off divisions. Their computers have never sold particularly well compared to Dell, HP, etc...

 

[LJ11]

Not exactly. Sony's actually laying off tons of people as well as killing off product lines ... it's no longer simply talk of reorganization.

The problem is that many analysts feel it may be too late.

You're right, they're taking more drastic actions now, because they've put it off for such a long time. Stringer has cut in the past, but they're taking it a step further now, a step some feel should have been taken years ago.

Same old song and dance, refers to a floundering Sony. Outside of PlayStation, Bravia, and to a lesser extent Cybershot, they've had no real growth drivers. PlayStation really propped them up during those lean years, SCEI was basically Sony's bottom line.

To be fair the Sony/Ericsson joint venture was a very good move. It's basically a case study on how to do joint ventures. Very successful, in a cut throat business.

 

[Raistlin]

The PS3 was a nice step in the more open direction. Well the early ones at least. I enjoy having a CF and SD card reader immensely.

The new ones are just as 'open' in that regard. They didn't remove the driver support for CF and SD.

 

[Deku]

Just to illustrate some of the absurdities that go on daily on the other board.

Gaming GAF: Cut PS3 price by $100 and pack in Killzone 2 and we have a winner this gen!

Reality: Click Here

 

[Ripclawe]

The restructuring is expected to be unveiled after this month's Consumer Electronics Show in Las Vegas and comes as analysts are warning that Sony faces long years of multibillion-dollar losses unless its president, Sir Howard Stringer, is given free rein to take on the company's old guard and erase many of its legacies.

This should have been done at the beginning instead of trying to half ass it.

 

[Raistlin]

I'm not sure you'll take my word for it, Onix, but I do follow the business world very studiously, and I think it's safe to say that genuine bankruptcy is out of the question for Sony. It is likely, however, that significant and dramatic reorganization may be in the works, with major divisions seeing liquidation or overhaul.

I agree.

This should have been done at the beginning instead of trying to half ass it.

To be fair, serious restructuring cannot just be done out of nowhere. A new guy can't just come in and pull it off immediately.

 

[The_Inquisitor]

First thing they need to do is fire whoever the hell thought putting out a 499 bundle was a smart thing to do.

 

[perfectchaos007]

Sony would have financial troubles with or without the recession. They were just lucky the recession happened when they were starting to fall.

 

[Comedyworks]

I just need enough upheaval to drop the PS3 another hundred dollars. so not like total upheaval... just a touch of it though would be ok with me.

:lol

 

[Crayon Shinchan]

You're acting as if slashing and burning isn't a common corporate practice.

If this situation is anywhere near as bad as it's being made out to be, then Sony 's going to have to cut deep. If that's the case who knows where they'll cut from.

Am I?

Or am I saying that, slash and burn is generally a short sighted and foolish strategy?

I'll qualify as well; it's a tool, but the way that american corporations have used it in the last decade or two, it's been for short term show on paper, while doing damage to their core competencies and long term health.

 

[RBH]

Just to illustrate some of the absurdities that go on daily on the other board.

Gaming GAF: Cut PS3 price by $100 and pack in Killzone 2 and we have a winner this gen!

Reality: Click Here

The sad thing is that there will still be some crazies in the Gaming forum that continue to insist that Sony cut the price of the PS3 while denying the reality of the situation.

 

[Drozmight]

Overall, people don't care about blu-ray or the PS3...

SONY NOOOOOO@@@O@@@@

 

[black_13]

Well in this recession, everyone is gonna take a hit. Even a well run company like Toyota is posting it's first loss.

It doesn't help that Sony doesn't seem to be having much luck with its own management and the fact that they have so many different divisions and what not. I bet if they drop alot of their unsuccessful divisions and stick to their roots again, they would recover. Not without some losses though.

And dropping Playstation after one generation of failure would be absurd. PSP isn't first either but its an achievement that no one had even come close to. They need to go back to their roots with PS4 and try new ideas.

 

[GenericPseudonym]

Then again what are Sony's core competencies? Electronics? Movies and Music? Gaming? I mean Sony's entertainment wing hasn't seemed to fare as badly, but it's not like they're going to gut the other divisions. I guess they'll just trim staff and spending in every one, rather than actually reducing their offerings.

 

[Opiate]

Am I?

Or am I saying that, slash and burn is generally a short sighted and foolish strategy?

I'll qualify as well; it's a tool, but the way that american corporations have used it in the last decade or two, it's been for short term show on paper, while doing damage to their core competencies and long term health.

It also doesn't touch on the preventative medicine that this conservative approach is supposed to provide: if employees truly believe that slash and burn tactics won't be used by their employers, and that the company will work hard not to jettison any employees even in downturns, this has a tendency to improve morale and loyalty over time. People are less likely to leave their jobs: people tend to work harder when the CEO says he cares about their job safety and actually seems to mean it.

For a time, when I was just out of college, I worked for a large retail chain, and it was clear that the upper management was in total disarray. Moving up in the company seemed to occur by pure happenstance, people were demoted for nonsensical reasons that clearly had to do with corporate politics, and they frequently brought in "fresh blood" from outside the organization, putting them in positions of high power and thus stunting the possibilities of those who had hired on with the company from the bottom, hoping to move up during their careers.

The situation was so demoralizing that the manager of my store -- who had turned our particular store in to the biggest money maker in the region -- left for Bed Bath and Beyond, and specifically used the phrase, "It's time to get outta here." Loyalty to the company was practically non existent, and the incentive to work hard was nearly so, as no one was particularly interested in moving up in a company that could demote or fire you at any time through no obvious fault of your own. We worked just hard enough to not get fired.

That's an extreme case (Although the retail chain in question is very large), but hopefully people can see my point. There are upsides to conservative corporate approaches like those we seen in Japan. Those upsides are supposed to include loyal, efficient and productive workers. Sony's situation is the worst of both worlds, however: they are purportedly loyal to their employees, but also losing money. The whole point of being loyal to your employees in the first place is to increase their profit potential.

 

[LJ11]

I could see them cutting the Ericsson, out of Sony Ericsson, doubtful though. If you ask people at Sony who's responsible for its success, they'll point to themselves because of the popularity of Cybershot/Walkman phones. Even though S/E has been relatively successful in the past, it's come under some heat; margins are squeezed, new players in the space, etc. Unraveling a structure like S/E would be pretty messy though.

 

[SRG01]

Same old song and dance. Sony's been going through this for years, but at least they had the PlayStation brand to fall back during their "rough patch." SCEI was basically their driver, no longer the case. Bravia proved to be a winning product line, until it fizzled out when cheaper competition flooded the market. Sony needs a growth driver, it's stagnate, relying on old/tired product lines.

Analysts/Journalists have suggested break-ups, much like lunarworks did, but Sony always shrugged it off. Stringer would magically unite everyone, synergies, and all that jazz. Easy to say, harder to do. He did spin off their financial arm (a pretty good earnings driver in its own right), which was a smart thing to do given the current economic environment, though they still have a significant stake.

Sony's an interesting company. They have a ton of potential, tons of resources, yet can't find away to pull it all together and leverage it to their advantage. Culture, both corporate and regional, has a lot to do with it.

One of the problems is that they have their hands in too many cookie jars, and not enough control in each to make a profit. Seriously, aside from Samsung, how many companies have fabbing and electronics manufacturing experience? And links to the music and movie industry?

 

[WrathOfOtaibah]

Slash and burn seems to appease only the stockholders and even then, that is a very brief appeasement.

 

[PhoenixDark]

Overall, people don't care about blu-ray or the PS3...

SONY NOOOOOO@@@O@@@@

PS3 I agree with, but it's too early to tell with blu-ray. Once HDTV market penetration increases the format should do well.

In terms of gaming the PS3 lost this generation a long time ago. Perception is really killing the thing. Same with the PSP ("psp has no games")

 

[SRG01]

Slash and burn seems to appease only the stockholders and even then, that is a very brief appeasement.

Stockholders are a fickle group. Stringer should be aiming for the long-term viability of the company instead.

 

[Fatalah]

The SEGA PlayStation!

 

[Opiate]

Then again what are Sony's core competencies? Electronics? Movies and Music? Gaming? I mean Sony's entertainment wing hasn't seemed to fare as badly, but it's not like they're going to gut the other divisions. I guess they'll just trim staff and spending in every one, rather than actually reducing their offerings.

This depends on how far back you look. Sony's major divisions (that is, listed separately on their FRs) are as follows:

Electronics
Sony Ericsson (Mobile phones)
Game
Pictures
Financial Services
Sony BMG Music Entertainment
All Others

Of those, these posted a loss last quarter:

- Sony Ericsson ($18 million loss)
- Game ($429 million loss)
- Financial Services ($275 million loss)
- Sony BMG Music Entertainment ($45 million loss)

In the previous fiscal year as a whole, the Game division was the only one posting a loss ($1.35 billion at today's exchange rates).

However, if you look back even farther to a decade or more, you might find that the Games division was very successful for a long period of time, while other divisions such as Electronics struggled. As such, it's difficult to know what they consider their priorities to be. Games has been far and away their biggest loser over the last couple of years: however, it had a long period of growth and profitability before that. Electronics had been doing well as of late, but had struggled for years before then.

So it's very hard to know what these "core competencies" are. If I had to guess, I would say that the Games division will feel some heat of a kind, while Electronics sees the biggest cuts, as it's a massive division with a wide variety of seemingly unrelated projects. Sony Ericsson may also see significant cuts.

I expect BMG Music, Sony Pictures, and Financial Services to remain largely untouched.

 

[ghst]

Sony management needs to make a rapid shift in its business model to one driven by earnings in the content business, he said.

The focus of research and development must be on software, he said, adding: “The most important thing is that, to improve organisational strength in the areas of development, purchasing and marketing, it will be necessary to further concentrate power in the hands of [Sir Howard] and unless this is achieved we believe [Sony] will be unable to close the gap with competitors such as Apple and Nintendo.”

while this all this talk smacks of (as much as it feels a cliche to say it at this point) sony's games division becoming software only, would the likes of nintendo still be considered a competitor if this was the case?

 

[Raistlin]

Then again what are Sony's core competencies? Electronics? Movies and Music? Gaming?

Their core competency has always been electronics R&Ding. Nearly every product line they have is an offshoot of tech they created (either proprietary, or they are the license/IP holder ... or at least a major one). Obviously stuff like their media content is to get monies from both parts of the pie.


I'd say their major issue is that they became quite large in terms of product lines and production, before the onslaught of commoditization in the electronics industry via low-wage competitors (Korea, China, etc).




No matter what happens, I pray that their R&Ding wing does not get hit. Even if it means Sony will reduce the offerings of their own brands, and move into more of an OEM business for some sectors.

They are arguably the most important company for A/V advances historically, and losing that would be a travesty. I can't imagine where we'd be right now if they weren't around, nor where things will go if they disappear.

 

[SRG01]

This depends on how far back you look. Sony's major divisions (that is, listed separately on their FRs) are as follows:

Electronics
Sony Ericsson (Mobile phones)
Game
Pictures
Financial Services
Sony BMG Music Entertainment
All Others

Of those, these posted a loss last quarter:

- Sony Ericsson ($18 million loss)
- Game ($429 million loss)
- Financial Services ($275 million loss)
- Sony BMG Music Entertainment ($45 million loss)

In the previous fiscal year as a whole, the Game division was the only one posting a loss ($1.35 billion at today's exchange rates).

However, if you look back even farther to a decade or more, you might find that the Games division was very successful for a long period of time, while other divisions such as Electronics struggled. As such, it's difficult to know what they consider their priorities to be. Games has been far and away their biggest loser over the last couple of years: however, it had a long period of growth and profitability before that. Electronics had been doing well as of late, but had struggled for years before then.

So it's very hard to know what these "core competencies" are. If I had to guess, I would say that the Games division will feel some heat of a kind, while Electronics sees the biggest cuts, as it's a massive division with a wide variety of seemingly unrelated projects. Sony Ericsson may also see significant cuts.

I expect BMG Music, Sony Pictures, and Financial Services to remain largely untouched.

Sony-Ericsson used to be one of their big earners (Walkman branded phones, etc), but it has slumped in the recent years. Personally, I blame it on design, not enough distinction from their previous generation, and so forth. On the other hand, Nokia is getting hit quite a bit too, so who knows what's going on with the cell phone industry right now.

Portable electronics also needs some revitalization -- marketable vitalization. I mean, a rolling MP3 player? REALLY? Sony has the capacity to make a competitive MP3 player, but for some reason they don't.

 

[Deku]

Their core competency is producing high quality electronics people want to buy, which they can charge a premium for with the Sony brand on it.

Opiate's analysis suggest a well diversified portfolio, with one division cover for the losses of the other divisions and the roles reversing.

The problem now is that there is a perfect storm hitting the company. And I'm not entirely convinced its because the economy is bad, though that certainly didn't help.

Their competitors are facing the same macro economic environment and some are doing much better. Samsung, after the Asian financial crises reorganized themselves and went after Sony's lunch in the CE market, LCD displays in particular. And Apple basically took over the portable music market (at least the premium part of the market) as consumers switched over from Walkmans to ipods.

 

[Raistlin]

Their competitors are facing the same macro economic environment and some are doing much better. Samsung, after the Asian financial crises reorgnized themselves and went after Sony's lunch in the CE market, LCD displays in particular. And Apple basically took over the portable music market (at least the premium part of the market) as consumers switched over from Walkmans to ipods.

Just to clarify, while Sony and Samsung are competitors, they actually have a joint venture for LCD panel production ... or has that changed?

 

[Afrikan]

we all know that its not in Sony's best interest to drop the price of the PS3...especially now...

but what if they released a redesigned PS2 for $99... it doesn't have to have a Wiimote.. (although I don't know what would be so negative about having it)

families are not going to buy a $399 PS3 for their kids during these tough times....especially when you have consoles for $199 and $250

 

[Terrell]

I'm sure Sony would sacrifice other divisions before going for the Playstation brand. The Playstation brand has a lot of value to it.

I have feeling their computer division might be the first to go if they do start killing off divisions. Their computers have never sold particularly well compared to Dell, HP, etc...

Ummm... the Playstation "brand" has only been around for about 15 years or so, and their hardware manufacturing business in the gaming division posts some of the company's biggest losses while having less employees than their other sectors. "Brand value" might be less important than trying to prevent LESS employee layoffs. And the majority of those employed by Sony are in their software development sections of their gaming divisions, which could be left intact to develop for *gasp* existing platforms.
Removing love for PlayStation and looking at the money it's been hemorrhaging since the release of the PSP is drastically important, and no matter how much Kaz Hirai and his posse reassure us that it will recoup its costs, it is, by its nature since the division's inception, a loss-leader product division, and loss-leaders might be a gamble Sony simply can't afford anymore with 2 current market competitors who cover the economic and premium brands in the industry.

 

[Deku]

Just to clarify, while Sony and Samsung are competitors, they actually have a joint venture for LCD panel production ... or has that changed?

In part because Sony was caught completely off guard by the growth of the LCD display market they chose to partner with Samsung to source their LCD screens.

Related reading:
http://www.vnunet.com/vnunet/news/2210637/sharp-dumps-samsung-sony

 

[Tabris]

Too bad Sony doesn't have more of a stake in Blu-Ray as how things are shaping up, that looks to be turning for the better. Prices are now dropping quite a bit on BD's (discs and players) and with that, market pentration is increasing.

I would be really interested in seeing the BD market pentration data after this Holidays as it seemed everyone was buying Blu-ray movies and players. Hell, during Boxing Day here in Canada, more Blu-ray's were on display outside the movies section than DVD's.

 

[Raistlin]

In part because Sony was caught completely off guard by the growth of the LCD display market they chose to partner with Samsung to source their LCD screens.

Related reading:
http://www.vnunet.com/vnunet/news/2210637/sharp-dumps-samsung-sony

Yeah, I'm aware of the history ... I was just pointing out their joint-venture (thought maybe you weren't are of it).


Even though they entered late, it seems like they've made the best of it. Their LCD's sell quite well.

 

[medrew]

In part because Sony was caught completely off guard by the growth of the LCD display market they chose to partner with Samsung to source their LCD screens.

Related reading:
http://www.vnunet.com/vnunet/news/2210637/sharp-dumps-samsung-sony

It wasn't just the panels, Sony and Samsung were (are?) sharing patents they pooled together in the joint venture. In some respects this helped them out since as you said they were late to the LCD market.

Sony didn't even trust Samsung's quality control enough for them to be assembled in the same plant, instead opting to send the components to Mexico to be assembled. I believe they backed off that a bit a while ago.

Yeah, I'm aware of the history ... I was just pointing out their joint-venture (thought maybe you weren't are of it).

You have to keep in mind that the electronics business is very incestuous. You'd be hard-pressed to find any of the big companies that haven't had very formal deals with each other (even looking at Sony and Toshiba with the cell despite HDDVD and Blu-Ray)

 

[lupin23rd]

I thought Sony already sold their financial division off? Or was that some other non-electronic related division they owned?

 

[Raistlin]

You have to keep in mind that the electronics business is very incestuous. You'd be hard-pressed to find any of the big companies that haven't had very formal deals with each other (even looking at Sony and Toshiba with the cell despite HDDVD and Blu-Ray)

Understood. I'm relatively well-versed in the industry. I only brought up the joint-venture because I thought it odd that Deku would point out Samsung as the one competitor he felt like mentioning.

 

[kame-sennin]

Ummm... the Playstation "brand" has only been around for about 15 years or so, and their hardware manufacturing business in the gaming division posts some of the company's biggest losses while having less employees than their other sectors. "Brand value" might be less important than trying to prevent LESS employee layoffs. And the majority of those employed by Sony are in their software development sections of their gaming divisions, which could be left intact to develop for *gasp* existing platforms.
Removing love for PlayStation and looking at the money it's been hemorrhaging since the release of the PSP is drastically important, and no matter how much Kaz Hirai and his posse reassure us that it will recoup its costs, it is, by its nature since the division's inception, a loss-leader product division, and loss-leaders might be a gamble Sony simply can't afford anymore with 2 current market competitors who cover the economic and premium brands in the industry.

Then the question is, are the PSP and the PS3 profitable? If not, how close are they to making a profit? There's no point in cutting off a loss-leader right before it attains profitability, even if it's not extremely successful.

 

[Terrell]

Then the question is, are the PSP and the PS3 profitable? If not, how close are they to making a profit? There's no point in cutting off a loss-leader right before it attains profitability, even if it's not extremely successful.

PSP is just beginning its profitability, but its profits aren't big enough to warrant maintaining the product when looking at the rest of the division.
And the PS3.... well, they've been saying "we're going to turn a profit soon" for the past 2 years now, and it hasn't materialized. And with the initial R&D and manufacturing costs being significantly higher than those of the PS2, and not selling nearly the volume of software that PS2 did to recover its costs (which, BTW, PS2 didn't hit profitability until 2 to 2 1/2 years after release, in spite of strong sales of hardware and software)... there's significant doubt that they won't hit profitability until the very END of the product's pre-successor introduction, and then the console after it has to compete in price and tech with Nintendo, which will likely inflate further R&D with no guarantee of being capable of competing with Nintendo, who has the strongest brand presence and MAGNITUDES more disposable money for R&D, marketing and production.

 

[tak]

Ummm... the Playstation "brand" has only been around for about 15 years or so, and their hardware manufacturing business in the gaming division posts some of the company's biggest losses while having less employees than their other sectors. "Brand value" might be less important than trying to prevent LESS employee layoffs. And the majority of those employed by Sony are in their software development sections of their gaming divisions, which could be left intact to develop for *gasp* existing platforms.
Removing love for PlayStation and looking at the money it's been hemorrhaging since the release of the PSP is drastically important, and no matter how much Kaz Hirai and his posse reassure us that it will recoup its costs, it is, by its nature since the division's inception, a loss-leader product division, and loss-leaders might be a gamble Sony simply can't afford anymore with 2 current market competitors who cover the economic and premium brands in the industry.

Sony's game division has been making a profit since early 2008 and it was still profitable in their newest finical report, unless I misread their finical announcements. I don't see any reason why they might all of sudden start operating at a loss again for the next report; I'm sure they're probably not where they want to be though (as pointed out by the article).

http://www.sony.net/SonyInfo/IR/financial/fr/index.html

 

[j-wood]

You guys are taking this a bit too far. Sony is in no way going to completely drop the gaming division.

 

[Mutanthands]

Sony's game division has been making a profit since early 2008 and it was still profitable in their newest finical report, unless I misread their finical announcements. I don't see any reason why they might all of sudden start operating at a loss again for the next report; I'm sure they're probably not where they want to be though (as pointed out by the article).

http://www.sony.net/SonyInfo/IR/financial/fr/index.html

According to the latest report, the games division lost money, just less than the quarter previously. Page 4 of the second fiscal quarter earnings report show an operating loss of 379 million dollars.

 

[Terrell]

Sony's game division has been making a profit since early 2008 and it was still profitable in their newest finical report, unless I misread their finical announcements. I don't see any reason why they might all of sudden start operating at a loss again for the next report; I'm sure they're probably not where they want to be though (as pointed out by the article).

http://www.sony.net/SonyInfo/IR/financial/fr/index.html

Nope, you're reading it wrong. They're still posting losses, in spite of increased sales, though the operating loss margin shrank because costs of parts for PS3 shrank. It also states right there in their consolidated 2008 forecast that the largest source of their financial losses was Pictures and Games divisions.

 

[evil solrac v3.0]

man if the playstation where to be dropped.....:lol the last time a console manufacturer did that this place (GAF) had a civil war..... we aren't even allowed to say his name anymore...