Hell Really HAS Frozen OverAmusingly, I went down a rabbit hole for the last 90 minutes that doesn't seem to actually exist.
What started me digging was a Joystiq post that said this:
Despite a small 6% dip in quarterly sales year-over-year, "due to a decrease in sales in the game business resulting primarily from unfavorable foreign exchange rates," Sony's Networked Products & Services group, which houses its PlayStation brand, posted an impressive ¥45.7 billion (rougly $564 million) in profits for the third quarter period, ended December 31, an impressive 135% boost over the prior-year period.
Wait, WHAT? Over HALF A BILLION dollars in profits? When PS3 sales have been flat for the last two quarters compared to last year, and software sales are up 30%?
That started me building a spreadsheet with sales information for all hardware and software sales for Sony gaming devices and software since the quarter the PS3 launched.
That took a while.
Then, because it just didn't add up, I started trying to come up with some sort of equation (excluding this quarter) that could roughly predict the results of the gaming division (and now, the Networked Products and Services division). That's still in process, but man, it's slow going.
In Q3 of FY2009, Sony reported $211 million of operating income from the NPS division, "primarily due to higher VAIO PC sales." They also noted that "despite a decrease in PS2 hardware and software unit sales, and PSP hardware unit sales, profitability was relatively unchanged mainly due to an improvement in the cost of PS3 hardware."
Okay, so operating income went from $211 million in the same quarter last year to $564 million this year. How do hardware and software sales for the gaming division compare to last year?
PS2 Hardware: 0%
PS2 Software: -52.68%
PSP Hardware: -14.29%
PSP Software: +10.00%
PS3 Hardware: -3.08%
PS3 Software: +21.01%
Hmm. So operating income is over $300 million higher compared to last year? And those are the comparison numbers?
Could it be PCs? They're in NPS as well. There were 2.7 million PCs sold in the quarter, compared to 2.3 million last year. Again, though, that's worth over $300 million in increased profit?
In combination, those numbers are pretty baffling.
Okay, here's Sony's official verbiage:
Operating income increased 26.3 billion yen year-on-year to 45.7 billion yen (564 million U.S. dollars). This was mainly due to a significant improvement in the cost of sales ratio coupled with an increase in gross profit from higher sales, partially offset by unfavorable foreign exchange rates. The game business benefited from significant cost reductions of PlayStation®3 (“PS3”) hardware and higher unit sales of PS3 software, which favorably impacted the change in segment operating results (excluding restructuring charges).
Hey, if the PS3 costs $50 less to make than last year, that might put them in the ballpark. And if the gaming division really accounted for the majority of that operating income, good for them. It certainly hasn't been a smooth road, so those numbers probably feel doubly sweet.
DQ Special Earnings Analyst Skip Key will hopefully weigh in on this later.