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Sony Q3: Game generated operating income of ¥0.4 billion

I've heard this on CNN just now.

I don't really understood what the anchorwoman was talking about (was only listening half-heartedly) but she made it sound like Sony was about to gothe fuck down (something about a 95% drop in income she reported with bated breath), and it's all the fault of the gaming division, and to a smaller extent, the rest of the electronics division.

I'm not even kidding, it was pretty sensationalistic language.
 
DarkMehm said:
The OP mixed Production Shipments with the new Unit Sales, here is everything with the new method aka normal shipments:

LTD:

PS3: 21.3 million
PSP: 49.58 million
PS2: 136.32 million
Click to expand...

Can you explain where you got the PSP and PS2 figures? Has Sony released early data using normal shipments? Thanks.
 
VERY surprised they had positive operating income in the quarter.

I figured Q3 (calendar Q4) would be bumper losses because of more (loss-making) PS3 hardware sales.
 
1cesc said:
Profit = net income.

And for those wondering, Sony is predicting shit to go down this quarter. They are sticking to their 260 bln yen operating loss projection for FY08, which means they would have to post ~320 bln yen operating loss in the next quarter...which is just startling, wtf are they expecting to happen??
Click to expand...

I'd imagine it's because they expect to sell far less products but they still have to pay all their employees they same amount they did during Q3. The reason Q3 tends to look so much better normally is that while they still have to pay their employees, they are also selling an extremely high volume of units compared to the rest of the year, so the profits they should hypothetically be making would be large enough to not only cover the expenses of production during Q3, but also buffer the entire corporation for the rest of the year where they sell much less but retain the same costs of production. Unfortunately, since they didn't make any profit this quarter (the company as a whole), that means they have to take the full brunt of their production costs with almost no product sales to offset the losses.

At least, that's how I understand how this works.
 
Haunted said:
I've heard this on CNN just now.

I don't really understood what the anchorwoman was talking about (was only listening half-heartedly) but she made it sound like Sony was about to gothe fuck down (something about a 95% drop in income she reported with bated breath), and it's all the fault of the gaming division, and to a smaller extent, the rest of the electronics division.

I'm not even kidding, it was pretty sensationalistic language.
Click to expand...

What the? For this quarter, the electronics division went from 200.6 billion yen in profits to 15.9 billion yen in losses and she blames the profitable games division? O_o
 
Nirolak said:
I'd imagine it's because they expect to sell far less products but they still have to pay all their employees they same amount they did during Q3. The reason Q3 tends to look so much better normally is that while they still have to pay their employees, they are also selling an extremely high volume of units compared to the rest of the year, so the profits they should hypothetically be making would be large enough to not only cover the expenses of production during Q3, but also buffer the entire corporation for the rest of the year where they sell much less but retain the same costs of production. Unfortunately, since they didn't make any profit this quarter (the company as a whole), that means they have to take the full brunt of their production costs with almost no product sales to offset the losses.

At least, that's how I understand how this works.
Click to expand...


Sounds reasonable.. that's assuming staff and operating costs separate from hardware-inflicted-losses are the driving loss factors, no?

I think we're all really still curious about the PS3 hardware profitabilty per unit.
 
Haunted said:
I've heard this on CNN just now.

I don't really understood what the anchorwoman was talking about (was only listening half-heartedly) but she made it sound like Sony was about to gothe fuck down (something about a 95% drop in income she reported with bated breath), and it's all the fault of the gaming division, and to a smaller extent, the rest of the electronics division.

I'm not even kidding, it was pretty sensationalistic language.
Click to expand...

it's 'teh bias'.

It spread from the forums to Yahoo to Wall Street Journal to CNN.

Obama is giving a speech next week about why the PS3 is teh dooomz.
 
DarkMehm said:
Sony PR from July which listed unit sales till June 08.
Click to expand...

I'm going to have to bug you again and ask you for a link, if you can. I tried searching but came up with nothing. :/ Much appreciated.
 
gofreak said:
VERY surprised they had positive operating income in the quarter.

I figured Q3 (calendar Q4) would be bumper losses because of more (loss-making) PS3 hardware sales.
Click to expand...
The costs for the PS3's sold last quarter were booked in Q1 or Q2. They would have had higher distribution costs to ship the holiday stockpile to stores but that's about it. Each quarter Sony makes 3-4 million PS3's, they sell 1-2 million 3 quarters out the year and 4-6 million last quarter. They also sell tons of peripherals (again the cost to produce them is booked earlier) and software. Hence as people have noted, the final quarter of the year is almost always the best quarter or video game companies. Even Microsoft made money a couple holiday quarters back when the Xbox was bleeding money like no tomorrow.

Even though Sony broke even, that's a big drop in revenue from last year's Q4. Given the global economic situation is only going to get worse and the Yen isn't weakening appreciably it sure sucks to be them.
 
Nirolak said:
What the? For this quarter, the electronics division went from 200.6 billion yen in profits to 15.9 billion yen in losses and she blames the profitable games division? O_o
Click to expand...
I kid you not. She mainly blamed the Playstation 3, then looked at her little fact sheet and mentioned PSP and PS2 as well.


It's that 97% drop that has everyone looking sternly at the gaming division, it seems.
 
gantz85 said:
I think we're all really still curious about the PS3 hardware profitabilty per unit.
Click to expand...

It's crude, but if you look at the sales of profit-making products vs PS3 in Q3 vs Q2, you might see the impact of falling PS3 hardware costs.

Q2 -39.5bn Y:

8.7 of PS3 software per PS3
9.5 of PS2 software per PS3
4.9 of PSP software per PS3

1.3 of PSP hardware per PS3
1.0 of PS2 hardware per PS3


Q3 - 0.4bn Y:

9.2 of Ps3 software per PS3
6.7 of PS2 software per PS3
3.5 of PSP software per PS3

1.1 of PSP hardware per PS3
0.6 of PS2 hardware per PS3

In other words, sales of PS2 & PSP hardware, PS2 & PSP software all fell relative to PS3 hardware sales. PS3 software sales relative to PS3 hardware sales were up a little bit.

Despite that, despite an apparently relatively lesser offset of profitable product, they went from negative 39.5bn to 0.4bn.

Of course, products aren't the only things contributing to profit and loss, but that's as much visibility as we have from these slides.

Bending_Unit_22 said:
The costs for the PS3's sold last quarter were booked in Q1 or Q2.
Click to expand...

Ah..well that throws a spanner in the works of my analysis :p Then we probably can't really say much for sure about the cost of PS3 hardware..'cept what Sony says about it steadily declining.
 
gofreak said:
Ah..well that throws a spanner in the works of my analysis :p Then we probably can't really say much for sure about the cost of PS3 hardware..'cept what Sony says about it steadily declining.
Click to expand...
Also, going from (39.5) billion to 0.4 billion is comparing Q2 to Q3 of the same year, which are very different quarters. Q3FY07 had a profit of 12.2 billion so profit fell significantly y-o-y. Another way to look at is the profit improved by 39.9 between Q2 and Q3 of 2008 compared to an improvement of 109.6 billion between Q2 and Q3 of 2007. Admittedly that doesn't say much about PS3 profitability (especially since the Yen's appreciation would have to be factored in at unknown values), just that the whatever the cause the Playstation division is getting hammered lately.
 
Uncle said:
They are on track to make a smaller loss than last fiscal year, so that's good.
Click to expand...
Perhaps you missed the part where they have written off 127 billion yen, this quarter alone, due to the strength of the yen? Understandable though, since the OP conveniently forgot to highlight that part.

03_image.jpg


(bottom left)
 
http://edition.cnn.com/2009/BUSINESS/01/29/sony.loss/index.html
TOKYO, Japan (CNN) -- Sony blamed the global economic slowdown, increased competition and an appreciating yen for a 95 percent drop in third-quarter profits, as the company announced its results Thursday.

Profits for the quarter, which ended December 31, fell from nearly 200 billion yen ($2.2 billion) in 2007 to about 10 billion yen ($110 million) in 2008.

Across the company, sales were down 25 percent, but electronics and games sales were especially hard hit.

Sales of games, including the company's popular PlayStation series, fell 32 percent over the year.
Click to expand...
 
Jonnyram said:
Perhaps you missed the part where they have written off 127 billion yen, this quarter alone, due to the strength of the yen? Understandable though, since the OP conveniently forgot to highlight that part.

03_image.jpg


(bottom left)
Click to expand...
Yes, written off Jonny. I thought once that's done it's "pack your bags and forget your losses" no?
 
financial reports, presentations shouldn't be posted on gaf, as most of the readers never had any accounting class.

unlike sales reports like npd, numbers on financial statements doesn't really mean much. You got to look at the footnotes to make anything meaningful.

remember the PS3 revenues destroys the 360 in the EA financial statement?
go take an accounting class if you want to find meanings in any financial statement.
 
Uncle said:
Isn't that for the whole company?
Click to expand...
Yeah, it's for the whole company, and according to the screens, Game represents a little under a quarter of the whole company's sales.

Edit: and as most gaffers know, the game sales are way higher outside Japan than inside Japan, so a large percentage of the game sales are hit by FX woes.
 
On this page you can see all the official Playstation shipments platform by platform easily (also for future reference):

http://www.scei.co.jp/corporate/data/bizdataps3_sale_e.html

Darkmehm has done all the right maths already:

LTD:
PS3: 21.3 million
PSP: 49.58 million
PS2: 136.32 million

Software LTD:

PS3: 155.9 million
PSP: 186.3 million
PS2: ~1.45 billion
Click to expand...


There are a few interesting things in my opinion in this quarter's results:

1) PS3 is basically dead on their hardware sales target (actually with 8.45m units shipped so far in FY2008 and one quarter to go they'll probably exceed their 10m target without any price cut) and right now it is the main software driver in the company which means PS3 is also Sony's most important product right now.

2)Revenues in the company are going down rapidly because PS2 is unexpectedly dying pretty quickly (with a 50% YOY decline in both hardware and software sales) after having held well for so much time.
PSP is really weak (and even declining) in software sales (PS3 is about to surpass PSP's lifetime software sales) and PS3 steep growth in software sales can't offset those.
Notwithstanding the lower revenues especially from profitable products and the stronger yen the quarter was profitable which means as Sony stated that the PS3 business is starting to hold on its own.


I think that with this situation there's no doubt we'll see actions to restore revenues.
PS2 as a profitability safety anchor is gone, but they'll proably try to play the $99 card before dropping production during 2010 in time for their 10 years plan. The key to Sony's revenues and profitability at this point is PS3 because it's their only product with strong growing software sales.
They will need to push PS3 software sales by a LOT this year to be profitable and that can't be done without a competitive price on the system itself which imo will definetly happen during the year.
Also PSP software situation is desperate and it's such a missed opportunity with a 50m installed base, Sony promised a software comeback in 2009 for the system, they definetly have to do something, they should try the digital download model seriously (also as a test for a future handheld), release many more important games.
So basically in 2009 Sony's main goals should be making PS3 their focus as a revenues driver and try to resurrect PSP software business.
 
giuliu said:
financial reports, presentations shouldn't be posted on gaf, as most of the readers never had any accounting class.

unlike sales reports like npd, numbers on financial statements doesn't really mean much. You got to look at the footnotes to make anything meaningful.
Click to expand...

Well then why don't you do a thorough analysis of this financial report for our edification?
 
Sony managed a really, really small profit. Good for them. The 360 price cut may have actually had tons to do with it, given that they probably could have still been outselling the system for the remainder of the year if 360 didn't price cut in August, they would have sold more PS3s, all at a loss. Even if they sold an additional 500k PS3s, and Sony only loses a modest 20 dollars on each (Just proving a point here, I'm sure they lose more than that), they would have lost an extra 10 million dollars thus putting SCE at a loss. At least they made a profit, so something good happened. :)

And I suppose the rumors of the divisional cuts were just that, rumors? I thought we were supposed to get an announcement on that when the numbers came out? Which website started that rumor so that I can send all my hate-mail there. :D

But all is not rosy in Sonyland. They'll probably lose money Q1, and things will be ugly, but for the next ninety days or so, they can breathe easily.
 
Doc Evils said:
A PS3 slim with reduced and simplified components for manufacturing would do wonders for Sony.
Click to expand...

Well I think you should storm Sony HQ with your company saving plan.
 
lowlylowlycook said:
Just to be specific compared to this quarter last year the game divisions profits are down 97%.

So no the PS3 isn't turning a corner.
Click to expand...

When was the $100 price cut on the PS3? 07 or 08? If the system sales were up about %30 percent from last year I don't see how you can be saying it is doing worse, or the same. Weren't ps2 numbers down significantly from 07? If the ps2 is pure profit, like someone suggested, that must have played a big role in the reduced profits.
 
Elios83 said:
There are a few interesting things in my opinion in this quarter's results:

2)Revenues in the company are going down rapidly because PS2 is unexpectedly dying pretty quickly (with a 50% YOY decline in both hardware and software sales) after having held well for so much time.

PSP is really weak (and even declining) in software sales (PS3 is about to surpass PSP's lifetime software sales) and PS3 steep growth in software sales can't offset those.
Notwithstanding the lower revenues especially from profitable products and the stronger yen the quarter was profitable which means as Sony stated that the PS3 business is starting to hold on its own.
Click to expand...

I don't really think the PS2 dying is all that unexpected at this point. In WW shipments there are almost 100 million in this gen hardware out there now likely. People are upgrading/jumping in for all 3 combined at a pretty good tick at this point. The YOY drops for SW and HW for last year will likely pale in comparison to this year.
 
A bunch of people are ignoring the fact that they don't give the net profit for the game division, just the consolidated net profit for all divisions. And there's a 56.6 billion yen difference (66.5 to 10.4) between the overall operating income and net income, who knows what that translates to for the game division.

So once again, operating income != profit. Net income = profit. The game division is likely in the black for the quarter, but much less than the .4 billion quoted.
 
Jtyettis said:
I don't really think the PS2 dying is all that unexpected at this point. In WW shipments there are almost 100 million in this gen hardware out there now likely. People are upgrading/jumping in for all 3 combined at a pretty good tick at this point. The YOY drops for SW and HW for last year will likely pale in comparison to this year.
Click to expand...

PS2 is on its way out, that's for sure, but it indeed dropped faster than they expected during the holyday season, infact they lowered their PS2 target by a million.
I think that looking at PS2 performance during the the first 6-9 months of 2008 and how it held on relatively to the competition it was natural to expect a more robust holyday season.
 
Their biggest loss has come from their TV's. The profits from the PSP hardware and software have actually covered the net loss on the ps3 as well. But yeah, recession and strong yen isn't helping.

I still believe a price drop is on it's way no later than April.
 
Mrbob said:
PSP over 50 million....jarrod laughed at me when I said psp can get to 60 to 70 million worldwide and around 16 million in japan.
Click to expand...
That was pre-2000. Without the JP turnaround, it'd have struggled to hit 50m.
 
Wolves Evolve said:
Sales of games, including the company's popular PlayStation series, fell 32 percent over the year.
Click to expand...

Wait a minute... what are we supposed to care about here?

I always assumed games, but then GAF taught me to care about profits. Now you're telling me it's sales and not profits?

SalesAge befuddles me.
 
gofreak said:
VERY surprised they had positive operating income in the quarter.

I figured Q3 (calendar Q4) would be bumper losses because of more (loss-making) PS3 hardware sales.
Click to expand...

Well luckily they managed to sell less PS3s so they could make a small profit.

Oh wait! Actually compared to last year their profit is down 97%.


Anyone have any clue to how elastic the price of making consoles is? What I mean is how much the cost of making the console depends on how many are made, say, per month.
 
lowlylowlycook said:
Anyone have any clue to how elastic the price of making consoles is? What I mean is how much the cost of making the console depends on how many are made, say, per month.
Click to expand...
Yeah, that has nothing to do with elasticity. Economies of scale is what its referred to
 
between the economic downturn and the cold reality that the ps2 is pretty much done turning high #'s + lack of psp software to complement the hardware = fail
 
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