PS3, PS2 takes top spot with 6.8m sold in Q3 despite dip in gaming profit

February 8, 2013

PS3, PS2 takes top spot with 6.8m sold Q3 despite dip in gaming profitwith Sony up to bat this time, Its time for everyone’s favorite topic again – corporate financials. The company just released its Q3 financials and while there were dips in the gaming division which seems to be par for the course, Sony as a whole performed decently.

The PlayStation division’s revenue experienced a drop by 15 percent year over year, which seems to be inline with the rest of the industry, with Microsoft’s Xbox business experiencing a dip of 29 percent. It is not clear how much of a drop Nintendo experienced last quarter as the company reported its 9 month revenue which revealed a  2.4 percent dip year over year.

PlayStation revenue dropped from 316 billion ($3.3 billion) yen to around 268.5 billion yen($2.9 billion), a net decrease of about $400 million.

On the operating income side of things for the PlayStation, the division did post a profit but experienced a drop year over year of 86.4 percent from 33.8 billion yen down to 4.6 billion yen ($53 million dollars).

Sony reports that 6.8 million PS3+PS2s have been sold during the quarter putting the lifetime PS3 sales to around 77 million, in line with IDC’s estimate earlier last month. PS3 sales continue to surpass Microsoft’s Xbox 360 sales, which is around 75.9 million as reported last month, but still behind Nintendo Wii’s 99 million.

PS Vita and PSP sales totaled 2.7 million units for the quarter. Sony did lower its forecast from 10 million (originally 16 million) to 7 million.

With the most number of consoles sold on the market, it seemed odd that Sony would blame low software sales for the dip in profits in its PlayStation division, especially considering that it sold over 61.7 million games during the quarter. A decent sales figure despite a 7 percent drop from last year.

While Microsoft records R&D costs for the Xbox division, it doesn’t appear Sony’s subsidiary SCE separates this line out.  With the rumors of a PS4 announcement this month, I would suspect that a sizable amount of that operating cost went towards it.

The company as a whole showed marked improvement with its operating profit returning to black for the third quarter in a row with a profit of $500 million after its disastrous loss of nearly a billion dollars same quarter last year. This is the third quarter straight where Sony has posted an operating profit.

In the previous financial year (2011) Sony  posted an operating loss of $6.4 billion, but have dramatically turned things around with a net operating gain of $954 million so far with Kaz Hirai at the helm of the electronics giant.

The company did experience a net loss of $115 million “attributable to Sony Corporation’s stockholders.” Though this really doesn’t speak to Sony’s performance per se as its to do with how many stockholders converted dilutive securities to equity at some point during the quarter.

What does this all mean? Overall, Sony has consistently shown over the past three quarters, that the company can manufacturer and sell products at a profit, which goes a long way towards proving its investable.  While two of the big three credit rating agencies scored Sony investment grade, Fitch lowered its rating to junk status noting that heavy restructuring will be needed. Kaz Hirai is doing just that and his plan seems to be working so far.

Sony’s stocks have increased by 60 percent since the start of the year rebounding from its 30-year lows.

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66 Responses to “PS3, PS2 takes top spot with 6.8m sold in Q3 despite dip in gaming profit”

  1. Roca.:

    “Sony reports that 6.8 million PS3+PS2s have been sold during the quarter putting the lifetime PS3 sales to around 77 million, in line with IDC’s estimate earlier last month. PS3 sales continue to surpass Microsoft’s Xbox 360 sales, which is around 75.9 million as reported last month”

    And Godless thought the PS3 will finish this generation in last place. lol

  2. me_:

    A lot depends on the success of the PS4.

  3. Roca.:

    Head-to-head sales (Since the PS3/Wii were released)

    Wii = 99N
    PS3 = 77M
    360 = 68M

    PS3 has outsold the 360 by ~9M since they were both competing against each other in sales.

    If the PS4 launch first…well you get the idea

  4. phranctoast:

    One thing that stood out to me was how much less the operating costs were this year as opposed to last.

    Barely advertising I guess will do that.

  5. Godless:

    Roca
    “And Godless thought the PS3 will finish this generation in last place. lol”

    Link please! as I do not recall ever saying this.

    LOL I love how you remove one year of xbox sales from the total sold, like it doesn’t affect the ongoing sales figures.

    Will be interesting to see how the two sell when launched directly head to head.

    I think Roca could end up been badly butthurt by the results :D

  6. CaptBirdman:

    I think the Xbox would jump to an early lead. That’s just based off legacy (and their rabid fan base), because MS would do anything to outsell PS, and that includes undercutting the price of their machine in order to have a bullet point.

    MS is kind of shady that way. Need only to look at their tactics at all of this gen’s E3s. But hey, it’s capitalism and it’s business, so I can’t blame them.

    However, should Sony stick to it’s free online model, and keep cranking out AAA titles from development studios that they own, I think this gen would see Sony as the lead console platform because as we’ve seen, PS3 had better games and has outsold the 360, not to mention the fact that the Wii U has failed to garner any respect within the community. As long as Sony keeps its head out of its ass with respect to pricing and the release date, I see the PS4 pulling ahead of all competitors within the first 2 years.

    I’m no analyst, but that’s what I see based on the anecdotal evidence

  7. Godless:

    Birdy
    “That’s just based off legacy (and their rabid fan base)”

    And the PS3 doesn’t have a ribid fan base ;)

  8. CaptBirdman:

    Not as rabid…

    You must have had your eyes and ears closed during 2006-2009. What you see now from PS3 fanboys is retaliatory.

  9. Roca.:

    @Godless
    “I think Roca could end up been badly butthurt by the results”

    As butthurt as you are now lol (I feel you…you’re speaking from personal experience)

  10. greenLanternfan:

    I don’t understand why VGChartz aren’t updating the ps3 sales.

  11. oldschool1987:

    Lol Bird and Roca are bang on correct in everything they say. I remember the rabid Xbots a few years ago, they’ve all left in shame and defeat. Godless isn’t really an Xbot I don’t think, I think he’s just trying to wind us up if I’m honest and it works sometimes. He knows the Ps3 is easily the most powerful console with the best rated and most exclusives and the best online service. I like Godless, I know he’s out to wind is up and I fall for it as well lol.

  12. CaptBirdman:

    Gods is a good person. I think he’s taking the piss, too, because he knows how easy it is to wind Roca up haha

    But sometimes it’s hard to know if what he’s saying is chaff though… some things, he believes. But his opinions aren’t wrong, because they are his opinions.

  13. oldschool1987:

    Everyone’s opinion is wrong except mine, that’s my opinion which isn’t wrong.

  14. CaptBirdman:

    lmao….

  15. gunstar:

    “I don’t understand why VGChartz aren’t updating the ps3 sales.”

    lol their days are numbered and their joke existence is coming to an end

  16. gunstar:

    … wait till PS3 is at $199.99 ….

  17. gunstar:

    great report Mike

  18. twilight:

    “Gods is a good person.” I agree with this. Godless is cool. He’s one of my favorite people. He really does prefer his Xbox360 but he will fire the Ps3 up for some gaming as well.

  19. phranctoast:

    @godless

    Is your other ID oSquishio? Or something like that? I noticed that person has plus and has been playing Quantum Conundrum a lot. If it is your ID I see two of the ones I recognize as yours (if this is one) with +.

  20. Roca.:

    ^ I have oSquishio on my friend list as well.

    I send that person a message a few days ago…

    Me: “who’s this?”
    oSquishio: “Cathy”

  21. dans:

    “I send that person a message a few days ago…

    Me: “who’s this?”
    oSquishio: “Cathy””

    Plot twist: Godless is actually a 65 year-old woman. :O

  22. phranctoast:

    Dum dum da duuuuuum.

  23. dans:

    Way off-topic, but…. LOL

    http://i.imgur.com/w4DCD0E.jpg

  24. CarlB:

    Kaz has done a phenomenal job of reducing losses year over year from ~$1.7B to ~$115M… unfortunately, Sony is still in the red (net income) by about $5B for the fiscal year ($115M for the quarter), and are about $8B in debt.

    Now they’ve downgraded the forecast of Vita by millions yet again due to it’s poor sales performance, have to sell their U.S. HQ (valued over $1B) in order to meet their March forecast profit of $214M, and they are about to transition into the next gen which will likely require them to sell PS4 hardware at a loss.

    Operating income is great. Hopefully one of these years it will get Sony to stop seeing red for net income like it has for the last four fiscal years straight.

    “‘Judging from the third-quarter results, the core business is not doing well and they are making up for that with asset sales.’
    A large chunk of these asset sales will come from the sale of Sony’s New York headquarters for $1.1bn (£700m), which will contribute $658m to the fourth quarter operating profits and help Sony back into the black.”

    Maybe next year, if everything goes well for them…

    “We see the coming fiscal year will be the year when we can bear the fruits of all the steps we’ve taken to bolster our competitiveness, invest for the future, realign our portfolio and restructure ourselves. You can judge our success once the results become clear.”

    http://www.ibtimes.co.uk/articles/432705/20130207/sony-third-quarter-results-progress-made-bravia.htm

  25. CarlB:

    “Sony’s stocks have increased by 60 percent since the start of the year rebounding from its 30-year lows.”

    They’ve also decreased in value by about 40 percent over the last year.

  26. Mike Ferro:

    @Carlb,

    , Sony is still in the red (net income) by about $5B for the fiscal year ($115M for the quarter), and are about $8B in debt.

    Where are you getting your data from? Net loss after shareholder equity conversion for Q1+Q2+Q3 only equal $546 million. From a profitability stand point Sony has earned an operating income of $954 million.

  27. oldschool1987:

    Here we go again, Mike vs Carl. I shall fetch my hat because shit will hit the fan lol.

  28. CarlB:

    http://www.marketwatch.com/investing/stock/sne/financials

    (click on the “income statement” button, then scroll down to “net income” row).

    From a “profitability standpoint” net income is the final sum. Operating income is factored into the total net income. In other words, even though they had operating income in the black, their total net income was still in the red.

  29. CarlB:

    “2012″ appears to be based off the report from March of last year.
    As you stated, Sony still has a net income loss (after operating income has been factored in) for this year of about -$.5B

  30. CarlB:

    corrected: “Sony is still in the red (net income) by about $.5B for the fiscal year ($115M for the quarter), and are about $8B in debt.”

  31. Mike Ferro:

    Lol, Doomsayer have emerged.
    Carl that’s 2011 Fiscal year ending in March 2012. That’s how its always reported because fiscal yr ends in March. I hope you haven’t been going around telling people that Sony already has a loss of $5 billion this year. lol

    That just doesn’t make sense regardless anyway if you think about it. I do like how you just threw those numbers out there though. :)
    but seriously, read the actual Sony financials first rather than only other people’s interpretations, including mine.

    Also, its “net loss” by the way, to say “net income loss” would be contradictory.

    Also, from a profitability stand point Sony has earned an operating income of $954 million so far this year. From an investor standpoint you don’t look at net loss as that has other factors attributed to it that are non-performance indexed based.

    Read here to see how “profitability” is gauged –
    http://smallbusiness.chron.com/definition-operating-income-net-sales-24911.html

    Also you keep saying Sony has $8 billion in debt, I think you are talking about long-term debt. All companies carry this as its bonds, notes, essentially stocks etc… with a maturity period of over a year. For example Microsoft has over $11 billion in long term debt. Its actually healthy to carry long-term debt as it allows companies to have high liquidity.

  32. CarlB:

    “From an investor standpoint you don’t look at net loss as that has other factors attributed to it that are non-performance indexed based.”

    …As I understand the definition, “shareholders’ equity is a company’s total assets minus total liabilities. A company’s net worth is the same thing.”

    You mention long term debt:

    Microsoft: $11B
    Sony: $8B

    That difference in debt seems vast until you put it in perspective of market cap (net worth):

    Microsoft: $230B
    Sony: $14.9B

    As you can see, Sony’s debt is over half their net worth, whereas Microsoft’s debt doesn’t even come close.

    I’m not saying Sony is “doomed”, I simply don’t think they are doing that well right now (let alone the last 4-5yrs) when they have to sell over $1B in assets in order to reach a net “profit” of ~$215M by March.

    http://www.bloomberg.com/news/2013-02-07/sony-unexpectedly-posts-eighth-quarterly-loss-on-tv-demand-slump.html

  33. me_:

    It’ also worth noting that Sony would have to pay more for their debt because of their near junk credit rating.

  34. Mike Ferro:

    Carl, as I mentioned you would look at Operating Income to determine profitability. Does the company earn more than enough revenue to cover operating expenses? Its a basic fundamental concept of making and selling goods.

    Read that definition of Profitability again in my link.

    You’re also getting a couple things confused here as thats the general definition of Shareholder Equity, Attributable to shareholder typically means when stockholders sell, convert (equity conversion) their shares to equity which is all part of normal business as even a Sony exec can choose to do this. Its not really a key performance indicator per se from an investment stand point. Its important to denote the cause here.

    Also, you seemed to be confused about long-term debt. It makes no sense to compare this with a company’s net worth as there isn’t a direct relationship. To dumb it down, its like saying “you can’t pay for your mortgage because your house is upside down.” (funnily enough, I’ve heard this comment about upside down properties from those ignorant).

    A better correlation would be from a revenue perspective –
    Sony $80 billion
    Microsoft $73 billion

    Its lumped into operating expense, but you’ll find that its quarterly impact is far more minimal than you would like to believe.

    But even then, as I mentioned having high long-term debt is not a bad thing as it helps the companies have high liquidity.

    “I simply don’t think they are doing that well right now (let alone the last 4-5yrs) when they have to sell over $1B in assets in order to reach a net “profit” of ~$215M by March.”

    See, again i’ve seen some odd behavior with people latching onto Sony selling its non-core assets. I’ve seen the same people that have criticized Sony by saying they need to get out of non-profitable businesses, and as soon as Sony sells off its chemical plants, and a non-core Sony Music building in NY and planning to sell of its battery division, those same people are saying Sony must be desperate.
    Now that just ain’t fair is it?

    Its no different then when people give you criticism Carl, and you start following through with it to only have them come back to slap you around for following their feedback.
    I would worry if Sony started selling off Game studios, Television & Imaging sectors, Movie studios etc..

    I guess the bottom line is do you continue to harp on Sony’s past failings or do you choose to see the dramatic improvement over the past three quarters and its positive trajectory.

  35. Roca.:

    Wow… Mike just schooled & humiliated Carl once again.

    That’s what ppl get for posting troll comments without doing any research.

    Carl really thought Sony is 8B in debt and lost 5B in 2012 lmao.

  36. Kushy:

    ^
    Looks who’s talking spam/troll/fanboy! :P

  37. oldschool1987:

    No hat was big enough for that shit storm.

    *Has multiple showers*

  38. Roca.:

    Some ppl really don’t know the meaning of spamming or trolling…how sad.

  39. CarlB:

    “Carl really thought Sony is 8B in debt and lost 5B in 2012 lmao.”

    Technically they were as of March 2012 roca.
    It’s the last fiscal year reported.

    @Mike,

    As I understand it, a corporation can make enough to sustain operations (positive operating income), but still wind up with a loss after paying the bills, including outstanding debts and what they pay back shareholders who have invested in their corporation (negative net income), which is the status Sony appears to be in now.

    A better correlation would be what a corporation actually “profits” after it pays back what it owes (net income). To dumb it down, it’s vaguely like the net income you calculate after your gross income when filing for taxes:

    Net income for fiscal year ending Mar 2012:
    Microsoft: $16.98B
    Sony: -$5B

    Again, I think Sony is doing the right thing by paring down the excess, and less loss is certainly better than more, however, it is still a loss as it stands now. Even bouncing back and making their $230M goal for the fiscal year doesn’t seem all that great in the face of the ~$10B they already lost over the previous four fiscal years.

    I believe they are moving in the right direction, but unfortunately, even after all the thousands of jobs they cut and whatever assets they have sold, it still hasn’t put them back in the black for net income, yet.

    In other words, I’ve already stated that I recognize their “positive trajectory”, but they are still under water, and there is only a finite amount of assets they can sell and jobs they can cut in order for them to break the surface. It appears they will have managed to sell a property valued at over $1B in order to eke out a $230M profit for the fiscal year by March. I don’t think this is “bad” or “good”, it simply is.

  40. CarlB:

    “Net loss”:

    “Total revenues were up 6.9 per cent year-on-year to ¥1.95 trillion ($20.8b/£13.3b) – 3 per cent on a constant currency basis – though Sony attributed the change to the favourable depreciation of the Yen and the consolidation of Sony Ericsson in February last year.

    The company made a net loss of ¥10.8 billion ($115.1m/£73.5m), significantly lower than the ¥159 billion loss it posted in the same quarter a year ago.”

    http://www.gamesindustry.biz/articles/2013-02-07-sonys-playstation-profits-slump-86-per-cent-in-q3

  41. CarlB:

    “Definition of ‘Net Income – NI’
    1. A company’s total earnings (or profit). Net income is calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses. This number is found on a company’s income statement and is an important measure of how profitable the company is over a period of time. The measure is also used to calculate earnings per share.

    Often referred to as ‘the bottom line’ since net income is listed at the bottom of the income statement. In the U.K., net income is known as ‘profit attributable to shareholders’.”

    http://www.investopedia.com/terms/n/netincome.asp#axzz2KXPgLxzH

  42. phranctoast:

    So “net income loss” is a Carlb-oism? ;)

  43. CarlB:

    Yeah, I should have just said “net loss” like GI did.
    ;)

  44. CarlB:

    …or “negative net income”.

  45. Mike Ferro:

    @Carl,

    Technically they were as of March 2012 roca. It’s the last fiscal year reported.

    lol Yea, but you originally said for this fiscal year, even threw in Q3 in there.

    As I understand it, a corporation can make enough to sustain operations (positive operating income), but still wind up with a loss after paying the bills, including outstanding debts and what they pay back shareholders …

    Good job Carl. great to see my teachings did not fall on deaf ears, lol.

    A better correlation would be what a corporation actually “profits” after it pays back what it owes (net income). To dumb it down…

    A better correlation to what? You’re not making much sense there, unless your talking about when I corrected your nonsense about correlating long-term debt to net worth. But even if that’s the case how does this relate to that? … okay, never mind your just doing your little immature mimicking thing you do when backed into a wall. I’ll just ignore that part. ;)

    even after all the thousands of jobs they cut and whatever assets they have sold, it still hasn’t put them back in the black for net income, yet.

    Yup, expect Sony to continue to sell all of their non-core stuff. Its silly to think if you cut jobs, sell divisions/assets you will see that equal value add up on the financials. Those divisions still earned revenue even at a loss, so you have to account for the cash flow reduction there. The goal is to stop the bleeding by dumping those divisions for the future, like cauterizing a wound. Think long term.

    Also, good to see your learning about net income/loss. I think the point you are waffling on is where to focus on. I know, you want to look at net loss, but if you want to know what is the most important baromater for investors its the Operating Income, cash flow.

    Net income/loss, is highly manipulated meaning lots of non-performance related hands go into it. Investments, stock equity etc.. Investors want to see how is the company performing, and want to gauge “profitability” in investment sense (not the general term, like profit). For example – If Sony continues to earn an Operating Profit, Fitch will reverse its rating as its become investable due to profitability.

    For investors, the operating income is used to gauge profitability.
    http://smallbusiness.chron.com/definition-operating-income-net-sales-24911.html

    Don’t take my word for it, look around and research. :)
    Cash is in constant flux, that net loss has already been paid off. The only thing static are the baramoters/metrics used to measure performance for investment purposes you care so much about.

  46. CarlB:

    “lol Yea, but you originally said for this fiscal year, even threw in Q3 in there.”

    Actually, I said for “the fiscal year”. This fiscal year hasn’t completed yet, and I already posted a corrected statement amended to “$.5B” for whatever has occured in the previous quarters this year.

    As for “net loss”, I don’t think any investor thinks that is a good thing, but you’re welcome to think the opposite. ;)

  47. CarlB:

    “Net Income (a.k.a. net profit or net earnings): This is the bottom line, which is the most commonly used indicator of a company’s profitability. Of course, if expenses exceed income, this account caption will read as a net loss.”

    http://www.investopedia.com/articles/04/022504.asp#axzz2KXPgLxzH

  48. Roca.:

    Someone just got schooled again…

  49. me_:

    “you seemed to be confused about long-term debt. It makes no sense to compare this with a company’s net worth as there isn’t a direct relationship.”

    It’s called the Debt/Equity Ratio but if that doesn’t make sense to you then that’s fair enough.

    This argument is getting silly.

  50. Godless:

    I’m with Carl on this one.

    At the end of the Day, on a very simplistic level, Sony is still spending more money than its making. Until that changes, they’re on a slippery slope downward as far as I can see.

  51. Mike Ferro:

    @Carl

    Lol, do you not read your own source? I never said net income was not important, I said operating income is a better barometer to gauge profitability.

    Operating Income: Deducting SG&A from a company’s gross profit produces operating income. This figure represents a company’s earnings from its normal operations before any so-called non-operating income and/or costs such as interest expense, taxes and special items. Income at the operating level, which is viewed as more reliable, is often used by financial analysts rather than net income as a measure of profitability.
    http://www.investopedia.com/articles/04/022504.asp#ixzz2KbNDH0Qi

    Actually, I said for “the fiscal year”. This fiscal year hasn’t completed yet, and I already posted a corrected statement amended to “$.5B” for whatever has occured in the previous quarters this year.

    Right. ;)

    Here is what you said:

    unfortunately, Sony is still in the red (net income) by about $5B for the fiscal year ($115M for the quarter), and are about $8B in debt.

  52. Mike Ferro:

    @me_

    It’s called the Debt/Equity Ratio but if that doesn’t make sense to you then that’s fair enough.

    Yea it shouldn’t make sense to anyone as equity does not equal net worth by multiplying shares. You have to factor in total assets. Look up formula for shareholder equity. Besides I don’t think D/E ratio was what Carl was quite going for.

  53. CarlB:

    “Lol, do you not read your own source?”

    I have, and in the context of net income, not focusing on operating income alone, then looking at the 5 year history of the corporation in question, in this case, Sony.

    As you can see from your link, net income is still the bottom line, and comes after figuring in other things besides simply operating income, things such as:

    -Other income(Expense)
    -Extraordinary Gain (Loss)
    -Interest Expense
    -Net Profit before taxes
    -Taxes

    The example they used has some significant differences from Sony:

    “As a result, the bottom line – net income – for the company (Company XYZ) in 2009 has increased from $605,000 in 2008 to $885,000 in 2009. The positive inter-annual trends in all the income statement components, both income and expense, have lifted the company’s profit margins (net income/net sales) from 40% to 44% – again, highly favorable.”

    In Sony’s case, they’ve had positive operating income for three of the last 5 entire fiscal years reported, yet this still hasn’t resulted in a net profit for them.

    In fact, in spite of positive operating income for those three out of five fiscal years, they’ve experienced a total net loss of ~$10B. For this fiscal year so far, they have reported ~$.5B net loss. As I stated, it is good they have reduced their losses, but they are still in the red.

    “I said operating income is a better barometer to gauge profitability.”

    This would normally be true if the corporation in question hadn’t seen a net loss for nearly the last five years straight in spite of 3 years of positive operating income. Sony is forecasting a $230M net profit for the fiscal year, but if they had to accomplish this gain through the sale of assets valued at over $1B, then I would say this is yet another reason why operating income is not a “better barometer to gauge profitability” for this particular case. Without the property to sell, they would likely still have had a net loss.

    Again, I’m not saying Sony is “doomed” at this point, I simply think they have too long a history of massive net losses to look at one potential quarter (or even year) as a success story for Sony. They are moving in the right direction, but they have a long way to go, while their product lines are seeing more and more competition every year.

    Besides this, their total liabilities and debt equaled $140B September of last year, about as much as Microsoft, Google, and Apple’s liabilities combined.
    h**p://ycharts.com/companies/SNE/chart#series=id:SNE,type:company,calc:liabilities,,id:MSFT,type:company,calc:liabilities,,id:AAPL,type:company,calc:liabilities,,id:GOOG,type:company,calc:liabilities&zoom=10&startDate=&endDate=&format=real&recessions=false

    In addition, Sony’s total assets were ~$170B as of Sept. last year. Microsoft, Google, and Apple’s assets equaled over 2-4 times the amount of their total debt and liabilities. Since total assets include everything that Sony owns (cash, buildings, divisions, intellectual property, etc.)…Sony would have to sell over 90 percent of their total assets (Total Assets = Every single thing Sony owns including cash) just to pay off their total liabilities.
    h**p://ycharts.com/companies/SNE/chart#series=id:SNE,type:company,calc:assets,,id:AAPL,type:company,calc:assets,,id:MSFT,type:company,calc:assets,,id:GOOG,type:company,calc:assets&zoom=10&startDate=&endDate=&format=real&recessions=false

    (total liabilities increase year over year)
    h**p://www.notenoughshaders.com/wp-content/uploads/2012/08/Total-Liabilities-chart.jpg

    ROA and ROE, sometimes considered as one of the largest factors of a public corporation’s health, have also been dismal for the last four reported fiscal years, with the last reported year being the worst:

    ROA = 100 × Net income (loss)÷ Total assets
    = 100 × (5,556) ÷ 161,767 = -3.43%

    ROE = 100 × Net income (loss)÷ Sony Corporation’s stockholders’ equity
    = 100 × (5,556) ÷ 24,685 = -22.51%

    h**p://www.stock-analysis-on.net/NYSE/Company/Sony-Corp/Ratios/Profitability#ROE

    I’m not saying both ROE and ROA are still going to be negative for this fiscal year come next month, just that their 5 year long history of increasing liabilities and debt (let alone 10 year) outweighs any small bumps due to sales of assets such as their U.S. HQ.

    http://www.notenoughshaders.com/wp-content/uploads/2012/08/ROE-vs-ROA-vs-Liabilities.jpg

  54. CarlB:

    Yes, the debt to equity ratio was definitely part of what I was talking about.

    Since their increasing year over year debt hasn’t yet resulted in a net gain, and they are still experiencing net losses, this d/e ratio trend is not a positive for them:

    http://ycharts.com/companies/SNE/debt_equity_ratio

    “A debt to equity ratio of 5 means that debt holders have a 5 times more claim on assets than equity holders.
    A high debt to equity ratio usually means that a company has been aggressive in financing growth with debt and often results in volatile earnings.”

    “If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing.”

    Sony’s D/E is 8.35 (Sept. ’12), meaning that debt holders had a 8.35 times more claim on assets than equity holders.

    In comparison (Dec. ’12 for all numbers), Microsoft’s d/e ratio is .19, Google’s is .07, and Apple’s is .54

  55. me_:

    A D/E ratio of 8.35 is insane and I’m sure is one of the reason the stock is in such bad shape.

    I can kind of see Mikes point though (although I think he’s wrong in this case). A high D/E can sometimes be a good thing, it pumps up the leverage and can multiply the returns. The key point is that you have to be getting better returns than the cost of the debt. Given Sony’s near junk rating I’m assuming their debt isn’t real cheap and they’re not exactly getting great returns.

  56. Roca.:

    @Mike
    Maybe you can write an article about this

    http://www.androidauthority.com/sony-playstation-4-feature-mobile-android-support-155457/

  57. Mike Ferro:

    @Carl,

    I have, and in the context of net income, not focusing on operating income alone, then looking at the 5 year history of the corporation in question
    As you can see from your link, net income is still the bottom line

    Lol, the definition of Operating Income has net income in context. It clearly says Operating Income is a better performance gauge than net income. You look at both, but the number you want to go with is the Operating Income if you had to pick from the two.
    Net income is always the bottom line, thats never going to change so not sure why you keep repeating it as that fact alone isn’t going to make it a better metric than Operating Income when gauging profitability for that quarter.

    In Sony’s case, they’ve had positive operating income for three of the last 5 entire fiscal years reported, yet this still hasn’t resulted in a net profit for them

    This is rich, why would you expect that to be the case? That doesn’t make sense at all as operating income doesn’t add up over time to boost net income. If you want to see a net income, Sony needs to increase Operating Income into the millions to account for all the non-performance related parameters that dip into net income or loss in this case.

    This would normally be true if the corporation in question hadn’t seen a net loss for nearly the last five years straight in spite of 3 years of positive operating income.

    You’re clearly confused as to what is for what. Regardless of what the historical trend is, that doesn’t change the fundamental rule of thumb that operating income is a better barometer in gauging performance for that particular quarter in any report at any time ever.

    Sony is forecasting a $230M net profit for the fiscal year, but if they had to accomplish this gain through the sale of assets valued at over $1B, then I would say this is yet another reason why operating income is not a “better barometer to gauge profitability” for this particular case. Without the property to sell, they would likely still have had a net loss.

    Another winner here – Why would that be the case? Your logic is flawed as its the opposite of what you are saying. Net Income would not be a good indicator of performance as selling the building is adding to net income. But since its not contributing to Operating income (asset sales don’t go here), that would be the better gauge as usual to determine true performance. (I think you inadvertently proved my point. :) )

    To reiterate again for the 4th time – Operating Income shows the ***ability*** for a company to make and sell goods at a gain, which means its profitable (make/sell/profit). If a company, (like Sony in the past) had a billion in operating loss in a quarter, the company performed poorly as it failed to show that its core operating expenses far exceeded its ***ability*** to sell its products.
    Rule of thumb – Regardless of trend when analyzing quarterly financials the closer you get to EBIT, the more accurate it is to gauge the company’s performance.

    Net Income is the bottom line, hence the furthest away from EBIT you can get. At this level its difficult to compare company vs company or accurately gauge its performance. Every company has a different capital structure, investments are different, stock equity turnover is different, and various other factors that aren’t indicative of a poor performing company (its also true vice versa).

    Its a simple concept you seem to have difficulty grasping. Here’s a few scenarios –
    Quarterly report shows company has a operating loss but still has a net income – Did the company perform well? No.
    Company shows operating income but has a net loss – Did the company perform well? Yes.

    Of course the best scenario is if the company had both net income and operating income, then they could take that net income and reinvest it into their operation. However, if a company incurs a net loss, its already paid off by the time you read the report as the company is constantly earning money through cashflow.

  58. Mike Ferro:

    Yes, the debt to equity ratio was definitely part of what I was talking about.

    lol. Says the guy that tried to correlate net worth by long-term debt. ;)

    BTW – Sony’s D/E ratio is 6 based on this Q3 report, which is still a tad on the high side.
    Also, just a tip you don’t compare software companies against CE manufacturing companies in D/E ratio as its not bad for manufacturing to hold around 50% d/e ratio, while its bad for software companies.

  59. Mike Ferro:

    @roca,

    I think that rumor is plausible. Look at the Vita, its very app centric.. check out the latest story on here for a new rumor about Microsoft’s Xbox 720.

  60. CarlB:

    “its not bad for manufacturing to hold around 50% d/e ratio”

    And Sony currently has about 3 times that even at 6.
    “tad on the high side” indeed. Any corporation that loses around 80% of it’s value over a decade or so while increasing it’s debt and liabilities many times over in the same period is a poor investment idea IMO. Your welcome to think the opposite, just don’t be surprised when you lose money as well.

  61. Mike Ferro:

    And Sony currently has about 3 times that even at 6.
    “tad on the high side” indeed. Any corporation that loses around 80% of it’s value over a decade or so while increasing it’s debt and liabilities many times over in the same period is a poor investment idea IMO.

    The voice of ignorance. I like how adamant you are that you know what you are talking about, when clearly with every post you prove you don’t. You making sweeping generalizations, you try to take net worth and correlate it to long-term debt and try to play it off like you were talking about D/E ratio after googling up some definition from Investpedia. lol. Then you try to compare Sony’s D/E to Msft and Google, which is ridiculous to do. :D

    Analyzing why Sony’s D/E is at 6 and why it dramatically increased in 2012 is something you can’t do. Has Sony engaged in capital intensive investments in 2012? Did Sony’s revenue increased dramatically from its finance/banking division and account for nearly 40% of its total in 2012? Do banks typically have high D/E ratios averaging 8-10? How is Sony leveraging its debt to maintain high liquidity?

    We are getting into a whole different area now. getting back to the main topic that started all this – I think I’ve done what I set out to do and that is to show you that looking at Operating Income is a better barometer to gauge performance rather than net income/loss when looking at quarterly reports. And also to do proper research before going around saying a company has $5 billion in loss when it didn’t current fiscal year.

  62. CarlB:

    You seem to be focused on the short term and present quarter performance instead of Sony’s 5-10 year performance as a whole, so let’s focus on that.

    Operating income this last reported quarter was 60% less than expected, whereas net income came in at a 10B yen loss instead of the estimated 21B yen gain.

    Perhaps the finances they used to restructure will pay off in the long run, perhaps not, however, selling real estate in order to meet net income goals for the fiscal year doesn’t seem to be a favorable indicator for a manufacturing/entertainment corporation. Yen is also currently in their favor, which is obviously subject to change.

    http://www.businessweek.com/videos/2013-02-07/how-will-sony-return-to-profitability#r=lr-fst

  63. Roca.:

    Give up Carl…Clearly Mike knows what he’s taking about and you don’t.

  64. CarlB:

    “Sony Corp. shares dropped the most in four years after reporting an eighth consecutive quarter of losses, an unpleasant surprise for investors who borrowed money to buy the stock on bets the weaker yen would help turn around Japan’s biggest exporter of consumer electronics…

    Sony shares slumped 10 percent to close at 1,365 yen, the biggest decline since November 2008. The company’s 150 billion yen ($1.6 billion) of convertible bonds due in 2017 fell the most since November, sliding 8.8 percent to 147 yen per 100 yen in face value, according to Nomura Holdings Inc…

    Unlike its rivals, the currency’s weakness hasn’t been enough to reverse Sony’s losses. The maker of Bravia televisions posted a loss of 10.8 billion yen, missing the average estimate for a 21 billion-yen profit from three analysts surveyed by Bloomberg. Panasonic Corp. posted surprise net income of 61 billion yen in the three months ended December, while Sharp made its first operating profit in five quarters.”

    http://www.bloomberg.com/news/2013-02-07/sony-margin-buys-hit-13-year-high-before-surprise-loss-announced.html

  65. Mike Ferro:

    @Carl,

    You seem to be focused on the short term and present quarter performance instead of Sony’s 5-10 year performance as a whole, so let’s focus on that.

    Yea…? because that’s what this article is about Q3 2012 financial performance. As I put it, Sony did decently. Not spectacular not poor, but decent.

    You’re the only one here jumping up and down yelling “Sony is doomed!! Look at all of these losses from 2011 that have nothing to do with its current performance trajectory!” You’re behavior is transparent to everyone Carl. I just stepped in to correct you on few of the things you were misinformed with. ;)

  66. me_:

    “Give up Carl…Clearly Mike knows what he’s taking about and you don’t.”
    Said the person who knows as much about finance as computer hardware.

    I think Carl is on the right track. There’s a reason why the share price is where it is, the market isn’t stupid despite what people say.

    “The company’s 150 billion yen ($1.6 billion) of convertible bonds due in 2017 fell the most since November, sliding 8.8 percent to 147 yen per 100 yen in face value, according to Nomura Holdings Inc”

    That’s probably telling you more about where the future share price is going to be than arguing about how they define profits. You would have to look a bit deeper into what the strike price/ coupons for the bonds were and what interest rate futures are doing though. On the face of it it doesn’t look good.

    But hell, we could all be wrong and Mike could be right. I bet Mike isn’t long Sony though.

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