PS4 may not happen folks Sony is in trouble

[Meister]

Originally Posted by Kyanbu The Legend

Admittingly I jumped the gun with Big N because I didn't see the specs at the time nor Reggie's reasons why the Wii-U costs 300+ with small HDs/SSDs.

Once I saw those and their market state, it became clear that Big N is fine right now and will be for the remainder of this gen.

Hey the next time you make a thread can you hold it back for a while, maybe sleep a night on it, and think about whether something like "Big N's great fuck up" is really the title you want it to have for the next few weeks or months if you're going to change your mind on it after one day?

Also can you quote the part of the article where it says there may not be another Playstation? I didn't catch it on what was admittedly a very cursory reading.

[Kyanbu The Legend]

Sony’s Shrinking Market Cap Value

Market Cap definition by investopedia.com: “The total dollar market value of all of a company’s outstanding shares.”

Market Cap definition by Wikipedia.com: “Market capitalization is defined as the share price multiplied by the number of shares in issue, providing a total value for the company’s shares outstanding.”



Below is a chart of Sony’s market cap value between September 2002 through September 7th, 2012.



Sony’s Market Cap Value on September 2000: $100 billion (Source: Bloomberg) http://www.bloomberg.com/news/2011-1...ttle-tech.html

Sony’s Market Cap Value on December 2007: $54 billion (Source: ycharts.com) http://ycharts.com/companies/SNE/cha...cessions=false

Sony’s Market Cap Value on December 12, 2011: $18 billion (Source: Bloomberg) http://www.bloomberg.com/news/2011-1...ttle-tech.html

Now lets skip to the most recent day that the stock market opened on.

Sony’s Market Cap Value on September 7th, 2012: $11.69 billion (Marketwatch/Wall Street Journal) http://www.marketwatch.com/investing/stock/sne

Nintendo’s Market Cap Value on September 7th, 2012: $15.9 billion (Marketwatch/Wall Street Journal) http://www.marketwatch.com/investing/stock/ntdoy

(Please Note: Market Cap Values typically change every day/week so any numbers posted for September 6th, 2012 will slightly change the next day or week.)

click this link for enlarged pic.




How bad are Sony’s Total Liabilities and Debt?

“We’ll have to fasten our seat belts and get ready for the turbulence,” Yuuki Sakurai said. “Hirai is in a tough position, I don’t envy him.” (Source)

Total Liabilities as of June 2012: http://ycharts.com/companies/SNE/cha...cessions=false

Total liabilities are the total amount of all financial obligations (short term and long term) of a company. This includes all creditor claims on company assets.

Electronic Arts Total Liabilities: $2.27 Billion
Google’s Total Liabilities: $21.33 Billion
Apple’s Total Liabilities: $51.15 Billion
Microsoft’s Total Liabilities: $54.91 Billion
Sony’s Total Liabilities: $135.61 Billion

Sony has more total liabilities than Microsoft, Apple, Google, and Electronic Arts combined.

Total Assets as of June 2012: http://ycharts.com/companies/SNE/cha...cessions=false

Total assets include cash in the bank, property, accounts receivable (money owed to the company), equipment, and inventory.

Google’s Total Assets: $86.05 Billion
Apple’s Total Assets: $162.90 Billion
Microsoft’s Total Assets: $121.27 Billion
Sony’s Total Assets: $166.22 Billion

Compare Apple’s total assets ($162.90 billion) to Apple’s total liabilities ($51.15 billion).

Compare Microsoft’s total assets ($121.27 billion) to Microsoft’s total liabilities ($54.91 billion).

Now compare Sony’s total assets ($166.22 billion) to Sony’s total liabilities ($135.61 billion).

http://ycharts.com/companies/SNE/cha...cessions=false

Since total assets include everything that Sony owns (cash, buildings, divisions, intellectual property, etc.)…Sony would have to sell over 80 percent of their total assets (Total Assets = Every single thing Sony owns including cash) just to pay off their total liabilities.

If you combined the June 2012 total liabilities of Microsoft ($54.91 billion), Apple ($51.15B), Google ($21.33 billion), and Electronic Arts ($2.27 Billion), that would equal to $129.66 billion in liabilities. Sony would STILL have $5.95 billion more in total liabilities than Microsoft, Apple, Google, and Electronic Arts combined. It really paints a picture of just how out of control Sony’s total liabilities have become.

Based on the chart below, you’ll notice that Sony’s liabilities (light blue) have been skyrocketing for ten years now.

Click chart below to enlarge size.



The biggest problem here is that Sony’s total liabilities show no sign of declining. They keep increasing and eventually, this bubble is going to pop. It’s important to understand that not all liabilities are inherently toxic. Companies are expected to have significant liabilities at all times. It’s when we compare Sony’s liabilities to assets ratio with that of other major corporations that it suddenly becomes clear that something has gone wrong.

Below: Chart of Sony’s growing liabilities over the years according to stock-analysis-on.net



On June 27th, 2012, Sony held an annual meeting with over 9,303 shareholders in Tokyo, Japan. After years of multiple disappointing quarters, some of Sony’s shareholders began to release their anger on Howard Stringer.

At the meeting, a heckler shouted:

“What a job, Mr. Stringer! Can someone tell me why we need to appoint this man?who built Sony’s debt to nearly a trillion yen?to chairman of the board? Is Sony that starved for personnel?”

Another heckler proclaimed:

“I am against reappointing Ryoji Chubachi and Howard Stringer as directors. Mr. Stringer tried to blame the company’s poor results on the 2011 Japan earthquake and flooding in Thailand, or anything else he could find in the business environment. He’s been giving excuses from the outset. The slow actions of those two have slaughtered the value of Sony.”

The room of shareholders exploded into applause around the auditorium.



Sony’s Capital Structure

Quote from investingdecoded.com that sums up Sony’s situation:


I see a higher chance of revival for Panasonic than Sony.
~ Yuuki Sakurai,
CEO at Fukoku Capital Management Inc.
On April 15th, 2012, investingdecoded.com wrote, “When subtracting deposits in its financial services arm, Sony still has 87 cents in liabilities for every dollar in assets. This rising debt balance has lead to increases in the firms interest expense. Sony is on the cusp of being deemed “non-investment grade” by Standard and Poor’s, which rates the firms credit as BBB+. Sony burned through 12.8% of it’s cash in the 1st 3 quarters of FY11.”
On August 6th, 2012, Moodys Investors Services placed Sony Corp. under review for a possible second downgrade for this year. At the current moment, Sony’s credit rating is three levels away from being declared “junk”. Moody’s is unsure whether Sony’s restructuring will even help. Moody’s commented on Sony’s restructuring process by saying, “Sony has not been able to deal with these issues effectively.” Moody’s added, “concern that weak consumer sentiment, especially in Europe and China, and a strong yen versus the euro may hinder the timely recovery of Sony’s earnings and leverage.”

Below are charts displaying Sony Corporation’s entire capital structure from quicktake.morningstar.com.

On June 2009, Sony only had 40.6% debt and 59.4% equity. By June 2012 (3 years later) Sony’s debt is now 50.1% of their capital structure, and their equity shrank to 49.9%. In three years, Sony went from a company that use to be mostly equity to a company that is now 50/50 on debt and equity.


On August 2nd, 2012, iTechPost.com reported: “Since he [Kaz Hirai] moved into the CEO office, Sony’s shares have tanked by more than two-fifths.”

When Kaz Hirai laid out his plans for saving Sony, he listed it in four steps:
•Focusing on core businesses (Gaming division, digital imaging)
•Streamlining Sony’s TV business
•Cut costs by transforming Sony’s business portfolio
•Speeding up innovation


I can’t see a scenario in which they boost their top line. The environment is still severe, demand for TVs won’t recover, and they’ve got no hit products. ~ Ichiro Takamatsu,
Bayview Asset Management Co

After hearing Hirai’s plans to save Sony, many of Sony’s asset managers have felt unimpressed with both his plan, execution, and recent results.

Yuuki Sakurai, CEO at Fukoku Capital Management Inc., oversees $7.3 billion of Sony Corporation’s assets. In June 2012, Sakurai said he doesn’t think Sony can turn things around: “I see a higher chance of revival for Panasonic than Sony,” said Sakurai, “Sony still hasn’t been able to show us the path for revival.”

Hirai announced a plan to cut 10,000 jobs at Sony, reduce the number of TV models, and exit out of PC-use optical drives. This month, Sony announced cutting 15 percent of the mobile phone workforce. Some of Sony’s asset managers think Sony’s strategy of cutting costs isn’t enough to make the company profitable.

“What they’re doing now is trying to squeeze out profits with cost cuts,” said Ichiro Takamatsu, who helps oversee $2 billion of Sony’s assets at Bayview Asset Management Co. in Tokyo, “I can’t see a scenario in which they boost their top line. The environment is still severe, demand for TVs won’t recover, and they’ve got no hit products.”

One of Sony’s own former executives thinks Sony’s days might be over.

On April 15th, 2012, Yoshiaki Sakito, a former Sony executive, was quoted saying “It’s almost game over at Sony.” He then continued, “I don’t see how Sony’s going to bounce back now.” Yoshiaki Sakito has also worked for Walt Disney, Bain & Company, Apple and a start-up focused on innovation training.


On February 3rd, 2012, incoming CEO Kaz Hirai told The Wall Street Journal, “I thought turning around the PlayStation business was going to be the toughest challenge of my career, but I guess not,” he said. “It’s one issue after another. I feel like ‘Holy s***, now what?’” He continued saying, “We really need to buckle down and be realistic. I don’t think everybody is on board, but I think people are coming around to the idea that if we don’t turn this around, we could be sitting in some serious trouble.”


I don’t think everybody is on board, but I think people are coming around to the idea that if we don’t turn this around, we could be sitting in some serious trouble ~ Kaz Hirai

When Hirai says not everyone is on board, he’s not joking. The idea of “buckling down” and “being realistic” typically means cutting costs and downgrading certain divisions, which would be a Sony engineer’s worst nightmare. Howard Stringer basically lost control of the company. It’s foreseeable that even more in-fighting may occur at Sony with Kaz Hirai running the show as a result of engineers protesting any cost cutting decisions that Hirai makes. Sony is so dysfunctional right now because engineers, not the executives, run the show. It will be difficult for Kaz to cut costs when Sony’s entire culture since the beginning of the company’s birth was founded on giving engineers freedom to create their ideas. If Kaz wants to be tough with cost cutting, he will have to completely reverse Sony’s entire culture.

However, that’s easier said than done. The most influential people at Sony have been there for more than 20 to 30 years, and they have been shown to flat out refuse drastic change. This is part of why Sony still acts like they are still the huge corporation that they were in the 90?s. The culture at Sony refused drastic change when Howard Stringer ran the show and the same will likely happen with Kaz Hirai.

Howard Stringer mentioned to Bloomberg that change has never come easily at Sony. This is mostly due to Japan’s lingering culture of lifetime employment that makes it difficult for Sony to shrink payrolls or close Japanese plants. Stringer also mentions Sony’s Japanese tradition of consensus building which makes it difficult for Sony to respond quickly to the orders of a strong leader. Howard Stringer says: “People mostly say to me, ‘You don’t need to do this. Why are you doing this?’”

PlayStation 3 is a great example of Sony giving too much creative freedom to its engineers by allowing them to create the Rolls-Royce of game consoles without any watchful supervision over the project to pay attention to the costs of materials. The engineers had very little respect for both Sony’s executives and former President and CEO Howard Stringer. The engineers tried hiding the costs from any non-engineer who would be a threat to their creative vision.

A Wall Street Journal article (via Kotaku.com) gave some more insight: “In developing the PlayStation 3 console, the device’s latest iteration, Mr. Kutaragi went over budget on development costs without informing Mr. Stringer, according to a person familiar with the situation.” The article continues by saying, “Mr. Kutaragi was notorious within the company for his reluctance to communicate with his bosses or other units. In 2005, Mr. Kutaragi hosted an event at a big electronics conference in Las Vegas to celebrate the U.S. launch of the PlayStation Portable handheld game machine — one of the company’s biggest products that year. He didn’t invite executives from Sony’s electronics division, which provided the parts.”

In 2006, Ken Kataragi said that PlayStation 3 was being sold too cheap and Sony was doing gamers a favor for giving it to them for $600. This is just another example of the arrogance displayed by Sony’s engineers and Sony’s top brass at the start of this console generation. In a 2006 article, PCWorld.com explained: “iSuppli called the PlayStation 3 an ‘engineering masterpiece‘,” with a motherboard that looks more like that of an enterprise server or network switch than a games console.”

According to iSuppli (in November 2006), the combined materials and manufacturing costs for PlayStation 3 came to about $806 for the model with a 20GB hard drive. This excluded the cost of the controller, cables, and packaging. For the $499 20 GB PS3, Sony took a loss of about $307 on each console they sold. For the $599 60GB model, they lost an estimated $241. By June 2009, GameSpot reported that manufacturing costs for the PlayStation 3 were down 70 percent. In a 2010 article from CNet/Wall Street Journal, Sony was losing 6 cents for every dollar of PS3 sales. At the time, the PS3 was selling at a retail price of $300 which means they were losing about $18 for every console sold.

Sony never learned from any of this.

That’s why Sony will sell PS Vita at a loss for three years. I don’t get the feeling that Sony looked at PS3 and said, “Maybe we should try to make a profit with Vita on year one”. There’s no sense of learning from past mistakes about taking major losses. There’s so many branches at Sony that the top executives seem clueless of what’s going on inside their own company, and nobody knows why Sony is selling so many television models when they are constantly losing money in that division.

In the state the company's in now, while PS4 will happen due to the pride of it's engineers and Kaz doing everything he can to keep the brand afloat, unless it's not sold at a loss, they will drop even harder.

There are dozens of factors into why Sony's in such a large hole right now, with the main one being the PS3 being sold at a loss of $300 per unit and is still costing them a loss even to this day. Share holders are lossing fatih in the company is in a state of total chaos.

Most companys don't fare all too well from a loss of $150 Billion and counting. And Sony is bleeding money so fast that unless they cut back and Make the PS4, their other products cost efficent, it's only going to make things worst for the company, eventually leading to bankruptcy.

[Aerozord]

I dont think the industry (I mean console gaming as we know it) can handle another generation. Nintendo, its not so bad since its just them catching up, but new consoles will mean unwritten requirement for better graphics, more content, and other material that makes an already expensive development cycle even more of a gamble. This means fewer new IP, and even fewer games period as it takes more resources to make

As for the consumer, no one is going to blow 500+ dollars in this market. Or to be more exact not enough people to make developing a game for PS4 a better idea than a PS3. Seems more likely to me if they did release a new system it would just die from lack of interest.

Sony would do better by focusing on reducing the cost of PS3 and expanding online content.

[Magus]

These topics have gotten really ridiculous. Quit believing this nonsense. It's goddamn Sony, man. They're a multi-billion dollar global corporate entity of unbelievable proportions that makes a zillion electronic products, not just video game consoles. Just...gah.

If you see something like this for Microsoft next, IGNORE IT.

Originally Posted by Aerozord

Sony would do better by focusing on reducing the cost of PS3 and expanding online content.

Well, they have expressed their wish for the current console lifecycle to be extended longer than people are predicting (as opposed to the 6-7-8 year lifespan of the PS2, depending on when you feel the PS3 really began to sell units, think 8-9-10 years, which see a PS4 appearing in 2014-2015, not next year like people act), and in my opinion Nintendo at least has tacitly agreed to this by releasing a console that is just as good, or only marginally better, than the current XBOX and Playstation in graphics.

And since the 720 stuff is all fluff and nonsense and rumors so far, Microsoft may be in agreement as well.

[Ryong]

You know how Sony was fucking up a LOT with their TVs and shit right?

[Kyanbu The Legend]

Originally Posted by Magus

These topics have gotten really ridiculous. Quit believing this nonsense. It's goddamn Sony, man. They're a multi-billion dollar global corporate entity of unbelievable proportions that makes a zillion electronic products, not just video game consoles. Just...gah.

If you see something like this for Microsoft next, IGNORE IT.



Well, they have expressed their wish for the current console lifecycle to be extended longer than people are predicting (as opposed to the 6-7-8 year lifespan of the PS2, depending on when you feel the PS3 really began to sell units, think 8-9-10 years, which see a PS4 appearing in 2014-2015, not next year like people act), and in my opinion Nintendo at least has tacitly agreed to this by releasing a console that is just as good, or only marginally better, than the current XBOX and Playstation in graphics.

And since the 720 stuff is all fluff and nonsense and rumors so far, Microsoft may be in agreement as well.

Except the company has confessed this through interviews, and is bleeding over 150 billion,over half what the company is worth.

PS4 will happen but unless it's handled right it's just gonna be another big loss with little to no profit gain. This goes for everything else they make from their media devices to the Vita, to their TVs and Desktops/Laptops. Sony's in one hell of a hole and it's getting deeper and deeper with each passing year. Let's not forget what happened to Sega, it took a merger with Sammy and a massive number of layoffs just to stay afloat and become what they are today.

I'm not saying the company will die out, hell Sega's still here and they fucked way worse then Sony has back in the 90s. I'm just saying they just aren 't the big giants they use to be.

[Meister]

So in "Big N's great fuck up" we learn that you jumped the gun and Nintendo is actually doing fine and in "PS4 may never happen" we learn that the PS4 will probably still happen.

Originally Posted by Magus

If you see something like this for Microsoft next, IGNORE IT.

Gonna have to go with this and a general request to stop overdramatizing things so damn much.

[Kyanbu The Legend]

And again I'd like to restate that MS has had no major problems at all so far. Company's doing fine.

PS4 will happen because of Sony being in a state of chaos right now. The engineers can pretty much do whatever they want with the company's money, one of the causes of their nasty debt problem.

That's what my thread was about. Sony's in a state where making a new system will not bring back anyprofits to off set the loss they'll get from it. Correcting that by releaseing it at $500+ and producing few units at a time will discourage new devs from working on it (Vita's already having trouble keeping 3rd party support). Meaning they're going to have to really focus on their 1st party exclusives.

It's a really tough spot they're in, I don't see why that's hard to believe that a company like sony can fall. Because trust me it wouldn't be the first time it's happened in history. You could find dozens of examples of huge companies that went out of business due to bad business moves, treating customers like crap, bad relationship with retailers, releasing defective products, ect.


There is no such thing as an invincible company, even corperate giants can fall after screwing up over and over.

[Aerozord]

Originally Posted by Kyanbu The Legend

It's a really tough spot they're in, I don't see why that's hard to believe that a company like sony can fall. Because trust me it wouldn't be the first time it's happened in history. You could find dozens of examples of huge companies that went out of business due to bad business moves, treating customers like crap, bad relationship with retailers, releasing defective products, ect.


There is no such thing as an invincible company, even corperate giants can fall after screwing up over and over.

Sony's game division is pretty independent of the company at large. Worst case their game division collapses and they liquidate it. Sony survived without a game division before it will again.

Large corps that collapse do so because they didn't diversify or because the issue was higher up in the food chain. Issue that would affect all branches like fraud, over-arching policy changes, ect.

[Jagos]

Sony's main problem is that they have all of these divisions that have internal competitions and can't coalesce on standards for the brand. While the gaming section might want Blu-Ray, the movie section might embrace HD-DVD which leads to a lot of infighting.

Personally, I have to think that moviebob is right about the PS and PS2 generations and Sony got lucky. Twice. They were in the right place at the right time and this year they've gotten their asses handed to them. The Vita isn't an effective alternative to the PSP because it's not backwards compatible. Further, I highly doubt that Sony has learned the lessons of other console makers to warrant a PS4.

I mean seriously, there's a statement about how they screw over third parties by locking up the power of the cell engine. WTF? The point is that open gaming is about to come and take them out with the heavy embrace of OUYA than the closed consoles of the past.

Further debate, Steam has TV now.

The gaming market is changing and Sony is behind the curve with their closed technology. Same with Nintendo that is competing with smartphones and Microsoft if they don't learn how to allow more updates and patches. We're seeing the gaming market change to one without these monopolies and I for one am glad to see more innovation.