RSSSony: Batteries, PS3 Will Cut into Profits
By Ed Oswald | Published October 19, 2006, 11:38 AM
Sony's financial problems became a bit clearer on Thursday as the company warned that its yearly profit would be about 62 percent lower than previously forecast, both due to the massive laptop battery recall and price adjustments to the PlayStation 3.
The company also gave a better idea of the total cost of the battery recall to date. Sony will set aside 51 billion yen ($429 million USD) for costs associated with the issues, which would appear in last quarter's financial reports. The end result would be a much less profitable Sony.
Instead of the 130 billion yen quarterly previously forecasted by the electronics maker, Sony now forecasts a 50 billion yen profit. Any remaining profits could be wiped out if either the PlayStation 3 does not sell as planned, or companies demand more compensation for the recall.
Toshiba, Hitachi and Fujitsu all say they will review how the recall has affected them and may ask for further compensation above and beyond what they are receiving to pay for the replacement batteries, which could push the total cost of the recall to nearly $1 billion.
Sony admitted that the new figure does not include any possible legal actions stemming from the recall, meaning there is the possibility a future forecast could revise numbers lower.
Sony's powerful gaming division is also contributing to the downward-revised profit numbers. Slower than expected sales of the PlayStation Portable, combined with a 20 percent price cut in the PS3 in Japan will double losses in the gaming unit to 200 billion yen, it said.
The PS3 is undoubtedly Sony's biggest project, but consider their huge consumer electronics division, providing TV's, sound systems, DVD players. PS3 won't make a single cent of profit, but Sony's overall bottom line will be propped up by their other divisions. I'm not aware of what kind of cash reserves they are sitting on, but a year that isn't profitable won't spell doom for Sony. Suffice to say, they will be in huge trouble if the PS3 flops, the time and money invested in this project could very well ruin Sony in the long term, or remove them from the console wars. But they survived Betamax thanks to diversification and I think they will survive PS3 (if it goes pear shaped) too.
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|I have been a long-time Sony zealot, but my faith has slipped with each new Sony release and each new Sony screw-up.
I really have no respect or sympathy for Sony any longer; back in the 80s they were a kick-ass company and then they started trying to make 'standards' that they could control/license and stopped caring what the consumer wanted- instead they tried to convince the consumer they wanted a betamax/minidisc/DAT/Memory Stick/UMD disc... oh- and ATRAC3 recordings are much better than MP3s!
BlueRay is technically superior to the HD-DVD, but so was the BetaMax- and Sony’s inflexibility on the sharing payers with the HD-DVD format will be another nail in their coffin…
Unless Sony is going to throw in an awesome DivX/XViD supporting media center player (like the XBMC) I don’t see the PS3 as being anything more than an uber-expensive game console- and something that parents will not buy for their kids. (let’s see, should I buy junior a $250 Wii, a $300 xBox 360, or $500 PS3 for xMas? –oh, I can get both of the former for about the price of the PS3?)
The PS3 has some great specs, but Sony’s arrogance in makes me not want to buy one; ‘the next generation doesn’t start until we start it’. Specs also don’t make a great game console- fun games do (as the PSP has shown).
The PS3 could make an inexpensive BlueRay player but it will never play HD-DVDs (strike 1)- and I have a PS2 and I never use it to play DVDs as it is much nosier than my $60 set-top DVD player (strike 2). I have also seen a BlueRay players on $6000 1080P plasma TV (at Magnolia)- and I was not at all impressed; Spiderman 2 didn’t look THAT much better than a standard DVD (strike 3)…
The PSP was the same way- all the rich kids went out an bought one to look cool- and they are still looking for decent games. I bought one when the price finally dropped and sold it on eBay a few months later- when I realized that I was using it mostaly as a glorified NES emulator…
Sony need to quit trying to push out pretty, shiny crap and listen to what their customers are saying- and support items (like their ill-fated Clie lines) for more than 6 months after release.
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|Erm, despite the battery problems, and PS3 price reduction which eats into profits,Sony didn't revise its full-year revenue forecast, which remains set at ¥8.2tn ($69.1bn/£37bn/€55.2bn).
They are not going anywhere anytime soon...
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|Any chance we might get your sourse for this information?
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|http://www.reghardware.c.../19/sony_profit_warning/
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|Sad to say but it sounds like Sony is going to be going out of business. The PS3 is not going to take off. Nintendo is going to make sure of that. The big mistake was trying to push the HD disk junk with the PS3. The PS3 looked good at CES, but the high price and lack of game support from the developers are going to be the last two nails in the Sony coffin.
Here "lies" Sony R.I.P
P.S. If you have any Sony stock, don't bother buying any toilet paper for the next year or so.
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|While Sony is definately in financial trouble and I do hate them I think it's extremely unlikely that the company will go bankrupt. At the worst they could sell of some of their other divisions. The PS3 won't do as well as they hope to start out with but it will pick up, there are legions of Sony fans out there that will HAVE to have a PS3 no matter what. The general public still equates the name Sony with quality also, no matter how shoddy their products have become. They're not going anywhere.
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|I plan on buying a PS3 if I can get my hands on one...
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|i hope sony has some success with ps3 to keep competition alive.
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|exactly!!!
why people wishing death to sony/intel/microsoft/_____ (fill in the blank) is beyound me.
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|"Any remaining profits could be wiped out if the PlayStation 3 does not sell as planned"
well, if sony makes enough of them there shouldn't be a problem.
after all, sony states:
"profit would be about 62 percent lower than previously forecast, due to price adjustments to the PlayStation 3."
and i don't think it was to make them more expensive.
i'll be buying one if they can manage to keep them on the shelf long enough, as well as several other people i know.
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|I'll be buying 1 too a couple of months after release, assuming I can get my hands on one by then. It looks to me like they will repeat what Microsoft did, and won't be able to fill demand until March 2007.
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