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SI: Sony Finally Posts A Quarterly Profit In Q3 FY09 Results

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Christopher

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After a seemingly endless string of quarters with profit loss, job cuts, plant closings and the prescription of “restructuring,” Sony has finally posted its first quarterly profit in a year and slashed losses in its full-year projections. Sony was very candid in their Q3 FY2009 Earnings Announcement, as Sony Chief Financial Officer Nobuyuki Oneda stated, “We think we’ve bottomed out and we can do fairly well going forward.”

We have full coverage below, but please check out WSJ’s analysis, and the official Sony Q3 FY09 Earnings Announcement (slides).

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Sony also stated it can expand its LCD TV sales by at least 33% to 20 million units in the next FY while maintaining profitability. It’s no secret that the electronics arm of Sony has faced five straight years of losing money in its TV segment, putting it in 4th place in the USA while Vizio, Samsung, LG and Toshiba steal precious market share.

Sony says it expects to see significant growth potential in the e-reader market. The company expects to sell more than one million units in the current fiscal year and sees that figure doubling or tripling in the next few years.

One of the biggest concerns for Sony is restoring profitability to its overall core electronics line and Playstation division, as both nearly account for two-thirds of Sony’s revenue. The WSJ reports that over the last year, “Sony has closed 20% of its plants, eliminated 20,000 jobs and overhauled its supply chain to reduce its costs by 330 billion yen ($3.63 billion).” Sony’s re-alignment of manufacturing sites (57 total as of December 2008) will face a 10% reduction, and the company is ahead of target with the number of sites to be at 46 by March, and 45 by May.

Sony revealed the plant closing in March will be the Sony Precision Engineering Center (makes lenses and other products) in Singapore, as well as the plan to transfer the Sony Manufacturing Systems Corporation’s Isehara Plant (which deals with measuring systems) in Japan to Mori Seiki Co., LTD. The plant closing in May will be the Sony Precision Engineering (makes components used in digital single lens reflex cameras) in Malaysia .

Here are the Q3 FY09 consolidated results:

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Quite amazing to see the contrast in operating income compared to last quarter. Nearly every segment of this quarertly reports have dramatically improved.

..and the adjusted year to date FY09 consolidated results:

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As we can see Sony’s sales are down for the year compared to last year, but operating income has risen sharply. So the revised forecast for FY09 should look like this now:

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As you can see operating income losses and income before taxes have been cut in half. Operating income as a whole is up 27%, with capitial expenditures down nearly 12%. R&D costs are also down very slightly at 2%. Here is a segment by segment breakdown of what went right and what went wrong last quarter, starting with Consumer Products & Services.

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As we can see, BRAVIA, optical pickups, stereo components and System LSI’s for the game business all saw a decrease in sales. However, as Sony’s range of LCD’s in that quarter were usually quite expensive, lower sales didn’t affect operating income in the TV division as operating income in that segment was stronger. Cyber-shot cameras also saw good return for Sony, which traditionally does very well during the Holidays.

Here’s the Networked Products & Services information:

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VAIO PC sales rose considerably in nearly all regions. However, Playstation sales were down with less consumers purchasing PS2 systems and games. PSP hardware sales were also down – this doesn’t surprise me much as Sony has been facing increased competition from Nintendo, Apple, and other companies getting into handheld gaming. PSP Go sales have been slow – there needs to be a price-cut and some sort of innovative promotion soon. Despite the decrease in sales, profitability was relatively unchanged due to an improvement in the cost of PS3 hardware.

Sony expects to lower production costs of the PlayStation 3 by 15% in the fiscal year ending March 2011, resulting in a benefit of “tens of billions” of yen. Currently, Sony loses about six cents for every dollar of PS3 hardware sales. PS3 sales rose 44% in its fiscal third quarter. Sales got a bump after Sony dropped the price by 25% to $299 in September for its model with an 80-gigabyte hard drive.

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B2B & Disc manufacturing did pretty well last quarter, despite a 0.5% decrease in sales. Disc manufacturing increased due to higher Blu-ray disc sales. B2B lagged slightly due to a decrease in sales of broadcast and professional use products brought on by the continuing difficulties in the business environment of developed countries.

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Sony Pictures once again had another stellar quarter with a 16% increase in sales worldwide and a 25% increase in the USA. Blockbuster movies such as 2012 and Michael Jackson’s This Is It led the way to higher theatrical revenues. Home Entertainment sales were up due to Angels & Demons and Terminator Salvation sales, and TV revenues rose from the new Dr. Oz Show.

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Sony Ericsson in comparison to all other segments didn’t do well at all – sales are down by nearly 40% to 14.6 million units! Sony states that this was due to a downturn in the global handset market, and a faster than anticipated shift to touch screen phones in the mid-priced sector of the market. We can only hope the fantastic XPERIA X10 and other devices planned for 2010 will usher a return to profitability and higher sales.

Here are Sony’s FY08 and FY09 unit sales of key consumer electronics and game products by quarter:

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