Sony: Poor Results Expected

Ahead of Sony Corp’s results announcement this Friday, analysts are predicting that Sony will have made a loss this financial quarter. Should that prove to be the case it will be the fourth quarter in a row that Sony has failed to make it into the black.

Sony’s second quarter (Q2 2009) runs from July through to September and as with their Q1 results Sony’s game business is likely to be a significant contributor to any losses.  Sony Ericsson is also expected to shoulder some of the blame.

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While September saw the launch of the PS3 Slim and price cuts for existing PS3 Phats that is likely to negatively impact Sony’s bottom line in two ways.  The first is what financial folk call “appraisal losses”.  The appraisal here is the valuation of Sony’s hardware stock.  Following the price cut the value of any PS3s that Sony has in its warehouses, which is an asset in terms of its contribution to the balance sheet, drops leading to a smaller positive influence on Sony’s figures.

The second impact is likely to come from the fact that, as far as we know, Sony is still selling each PS3 at a loss.  With the huge sales jump (700% in Japan) that the PS3 has seen worldwide the loss that Sony is making on each of those consoles will be piling up quickly.  The resulting bump in software sales and licensing revenue will probably be trailing the hardware sales and not have much impact on the Q2 results.

Analysts are more positive about Sony’s future prospects, particularly when compared to Nintendo.  “Nintendo is now losing steam while Sony’s game operations are on the rise” says Yasuo Imanaka an analyst for Rakuten Securities, “Over the past two years, its hardware prices have fallen and its software lineup has become stronger.”

They contrast that against Nintendo’s fortunes regarding its slowing sales of the Wii.  In Sony’s home market of Japan they are also looking to Final Fantasy XIII, which is a platform exclusive there, to provide a significant boost come December.

We will bring you all the (relevant) gory details of Sony’s balance sheet once they are known later this week.

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