Thursday, February 02, 2012

Sony Earnings

You guys are flooding me today with the link to Sony's earnings, so let's take a look.

In short: ewww.

A $2 BILLION loss for the quarter. A revised forecast with a 2.5X multiplier to the initial projected loss for the fiscal year (now estimated to be in the $280M range).

What happened? Here's Sony's explanation:
-Consolidated sales decreased significantly year-on-year primarily due to the impact of the floods in Thailand, deterioration in market conditions in developed countries, and unfavorable foreign exchange rates.

-Consolidated operating loss was recorded compared to income in the same quarter of the previous fiscal year, primarily due to a significant deterioration in equity in net income (loss) of affiliated companies, in addition to the above-mentioned factors.

-The deterioration in equity in net income (loss) of affiliated companies was primarily due to an impairment loss on the shares of S-LCD, which were sold in January, 2012, and the recording of a valuation allowance on deferred tax assets at Sony Ericsson.

What they've cleverly done, though, is bury the lead, because what's particularly stunning is the decline in sales. Look at the comparison from Q3 of the last fiscal year (and remember, Q3 for Sony is the holiday quarter):
LCD TVs -24%
Video Cameras -25%
Compact Digital Camera -18%
PCs -3.7%
PS3 +3%
PSP -30%

Yes, a 3% gain in sales from last year makes the PS3 the "star" of this sorry lot. Even there, though, the forecast for the full fiscal year was dropped from 15 million units to 14.

Oh, and while PC sales barely dropped, their annual forecast dropped by 1 million units as well. Basically, the only part of Sony worth owning right now is the financial services division (they sell insurance), which made $428M in Q3.

Now, it's not like Sony is alone in the boat. Toshiba, Sharp, Nintendo (now forecasting a $580M loss for the fiscal year) all had lousy earnings--and tomorrow, Panasonic will follow suit. The appreciation of the yen and declining sales are a double whammy.

I'm not sure what Sony's play is here. The LCD market has blown up in their faces, the camera market is in decline, everyone is eating their lunch in cellphones, and the PS3 is solidly third in consoles. Oh, and the Vita launch in Japan has been very ugly.

To borrow from Blazing Saddles, somebody's gonna have to sell a shitload of insurance.

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