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Sony is in Big Trouble! good read!

ArrancarVizard · 2008-11-22 01:20:39

I was browsing the VG chartz forums and found this There has been a lot of scattered discussion in several threads about Sony's financial situation and future. Discussions like this will become more and more prevalent in the next few months, and there's a lot of misinformation flying around, so I thought there should be a thread to discuss this and accompany the evolution of their situation.Here are Sony's current problems:1- Weak Western currencies.This was already discussed at length in this article, and it's something which also affects Nintendo (although the impact is much worse for Sony). If you want to know why this is such a big problem for them, you can read that article or this one.This is so much of a problem that according to an article from yesterday, Sony is increasing the price of products it ships to retailers in the UK by up to 33%. No news yet on whether this will affect consoles and games, or if it also extends to other European countries.2- Fragile profit marginsIf you check out Sony's official Investor Relations page, you can see their financial data many years back. For illustration, let's look at the main indicators, revenue and profit for the latest financial years and quarters. The profit margin is simply the profit divided by the revenue, and indicates how much money Sony makes off of every Yen (or dollar or whatever) they have in sales.Year/quarterRevenue (billion Yen)Profit (net income, billion Yen)Profit margin2005 fiscal year7457123.61.65%2006 fiscal year8296126.31.52%2007 fiscal year8871369.44.16%2008 first quarter1979351.77%2008 second quarter207220.81.00%This has been one of Sony's biggest problems, and Sony's CEO has been pledging to solve it, as you can read in this article.For reference, Microsoft usually has profit margins of around 30%. Before the currency problem explained above, Nintendo also had great profit margins of around 25%, and after that they fell to around 10%! That alone should tell you how much of a problem the currency exchange factor poses. It's important to note that the currency problem has gotten worse since the last quarter, making it very hard to believe Sony can pull a profit during this holiday quarter.When you're only making one or two dollars for every 100 dollars you get, and you suddenly start receiving 80 dollars for the same products, that spells big trouble.3- Lower consumer confidence due to the economic crisisThis doesn't seem to affect the gaming market a lot, but it does affect Sony as a whole. For information on this, there are tons of reports about lower retailer sales and expectations for the holiday season. Some articles:Article 1Article 2Article 3There are also specific reports on how it's affecting Sony's products, for example:Sony's TV sales slumpBlu-Ray sales forecast down4- The economic crisis is nowhere near overThere are tons of articles about this, but here are two:Article 1Article 2DiscussionThe factors above, IMO, create a perfect storm for Sony. This is not yet very discussed if you look at the mainstream media, but I believe in January after Sony releases its earnings it will become more and more public, and then we may start seeing Sony's actions to get the company to survive the storm. I'd be very surprised if Sony doesn't become a smaller company in the next few years.What do you think Sony will do? Big layoffs? Getting out of some markets or cancelling product development?In my opinion, the best case for Sony is:1- A recovery of the Western currencies during next year.2- A successful downsizing/restructuring which allows them to become profitable even with lower consumer purchases.We could get to a point in which most people don't have money to buy the sort of products Sony makes, making it impossible to justify the existence of such an electronics giant.The worst case is, of course, bankruptcy. If Sony can't or doesn't want to change itself quick enough, they may have to get 'bailed out' (a very fashionable expression these days) or file for bankruptcy, which would either end the company or force it to sell off a lot of its parts. http://vgchartz.com/forum/thread.php?id=50069 Discuss!!

svetzenlether

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#51 svetzenlether

Member since 2003 • 3082 Posts

[QUOTE="nintendo-4life"][QUOTE="Gh0st_Of_0nyx"] I dont need a bunch of fanboys to tell me sony is in trouble :P Look at the sales of there crap console and hendheld and I can put two and two together. [QUOTE="JIT93"][QUOTE="Gh0st_Of_0nyx"]The moment I read Vgchartz I :lol: Vgchartz is he equivalent to national enquirer when it comes to new's and "facts"Gh0st_Of_0nyx

Weren't you a lemming before:?

Im not a lemming Im a sheep and Vgchartz has 0 credibility IMO so even when people use it to bash the ps3 I cant take it seriously.

Everything's linked to sources on that post, regardless of whether it came from the Vg Chartz forums or not. Unlike most of the people posting in this thread, it seems that poster was actually paying attention in school when they went over how to properly research.

16 years ago

eklineage

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#52 eklineage

Member since 2008 • 2413 Posts

lol last time i checked, nintendo isn't third party.

16 years ago

naruto7777

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#53 naruto7777

Member since 2007 • 8059 Posts

yes i completly agree

16 years ago

carljohnson3456

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#54 carljohnson3456

Member since 2007 • 12489 Posts

Well, first of all, it was a well written article, even if it was written by some random user. Secondly, I personally think the PS3 will be fine, Sony will be able to turn around and learn from their mistakes, but hopefully Blu Ray will take off the way they want it to and help recoup some of the costs of the PS3.

16 years ago

megaton3k

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#55 megaton3k

Member since 2007 • 515 Posts

I feel bad I wasted brain power reading this crappy thread, and feel sorry for the TC using VG charts as reliable source. I'm going back to playing Resistance 2.

16 years ago

mattbbpl

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#56 mattbbpl

Member since 2006 • 23331 Posts

I feel bad I wasted brain power reading this crappy thread, and feel sorry for the TC using VG charts as reliable source. I'm going back to playing Resistance 2. megaton3k

People should really read the sources before dismissing something as incredible.

16 years ago

Sony is in Big Trouble! good read!

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