Sony
From Marketwatch:LONDON-- Japanese consumer electronics giant Sony Corp. on Thursday unveiled its long-awaited three-year restructuring plan, vowing to cut 10,000 jobs, combine television-making plants and streamline its electronics division. Sony also said it would now post an annual loss for the first time in a decade on restructuring costs...
Sony now sees a 10 billion yen ($89 million) loss on sales of 7.25 trillion yen for the year to March 31.
It previously forecasted a 10 billion yen profit for the year; its sales outlook is unchanged. In July, Sony cut its group net profit outlook to 10 billion yen from 80 billion yen. Sony also lowered its group revenue outlook for this fiscal year to 7.25 trillion yen from 7.45 trillion yen.
When business is going well for a company, they don't turn profits into losses by "restructuring." Sony is being hit by two giant product transitions at the same time. First is the HDTV transition. Sony has excellent HDTV products, but they're uniformly overpriced compared to the competition, and the competition is absolutely fierce. And this transition is coming in an industry that hasn't had a sweeping product transition for decades, at least in the U.S. market.
That would be enough pain for any company, but Sony has a second major product transition: the PS3. The Cell processor was an unbelievably expensive project, and I'm sure that Sony was looking at profitability for the Cell as a lifespan calculation, not something that would pay off in the first two to three years. When the rest of the company isn't doing well, though, it puts far more pressure on the short-term economics of the gaming division.
What does this mean for us? Potentially, two things. One, a higher initial price for the PS3, as Sony could be unwilling to absorb the loss on manufacturing costs of the unit. Two, it means there is unbelievable financial pressure on Sony to release the product in the U.S. before the holiday season in 2006. Yes, I know it's projected for a spring/summer launch, but Sony is behind. Everything I see tells me they're significantly behind that schedule, probably six months behind.
Again, if the rest of the company is doing well, it's not a problem--just launch in September/October 2006. That may not be an option now, though, so if they do manage to launch in Spring of next year, I think it will initially be weak in terms of software. The PS3
is an extremely powerful machine and it will produce outstanding games, but the learning curve is going to eat some developers up, at least for a while.
Oh, and don't forget that Sony is adding another product transition next year: high-definition DVD, and they're currently fighting a format war.
That's got to be one of the most brutal product environments I've ever seen for a consumer electronics company.
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