Thursday, July 30, 2009

Sony Earnings

Well, to no one's surprise, Sony had a horrible first quarter.

Interesting, they've realigned their business segments, and one of the effects of this realignment is to make it more difficult to precisely know what's happened in the game division. Before, they was a division called "Game," and everything in it was entirely self-explanatory.

Now, there's a segment called "Networked Products and Services," which includes games and:
--digital music players
--personal navigation systems

That "etc." is theirs, not mine.

Before, the game division results were broken out quite neatly with their own slides. Now, there are no unfiltered results for the game division anymore, just an overall result for all the products in that new segment. Hardware unit sales are still available, but software sales have mysteriously disappeared, although the report notes that they're "down." Here's everything in the earnings report that I could find related to games:
Approximately 1.1 million PS3 units and 1.3 million PSP units were sold in the first quarter of the current fiscal year compared to approximately 1.6 million PS3 units and 3.7 million PSP units in the same quarter of the prior fiscal year.

...In the game business, the deterioration in profitability was mainfuly due to a decrease in overall software unit sales and a decrease in PSP hardware unit sales.

So PS3 sales worldwide are down 31.6% in the first quarter, and remember, there's no indication that the second quarter is going to be any better. And PSP sales were down 64.8%!

There's more information near the end--sales broken out for the game unit:
Q1 2008: 214,991 yen (in millions)
Q1 2009: 110,514 yen (in millions)

-48.6%, in case you're wondering. Staggering.

Okay, let's do some napkin math here based on what they're reported. It's safe to say that July PS3 sales have not improved, so let's add a month at the first quarter's sales rate. That puts them at 1.46 million units in four months.

To hit their original fiscal year target, that means they need to sell 11.54 million units in the remaining eight months of their fiscal year (which ends in March).

Without a price cut, a reasonable estimate for their fiscal year would be seven million units--barely half of their original projection.

Based on the numbers of the first four months, a $50 price cut might well only get them to ten million units for the year. So unless the're going to seriously revise their estimates downward, we're going to get a $100 cut, and I think it has to get announced within the next eight weeks.

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