Sony misses expectations but revenue up - Q2 report

As has become the ten-year tradition, prior to a next gen console arriving, there has to be a great effort put into fearmongering the rapid death of Sony is near.

While Sony missed analyst expectations, their revenues were up slightly from last year. The basic fact about the financials is Sony is staying about the same it has for the past few years. Not good for a company or its stock but no indication of some fanatics' wish for an immediate bankruptcy. It means Kaz the Janitor can mop up the mess left by Stringer the Hut, start getting rid of what doesn't make financial sense, get more products out of the lab and on to the shelves, streamline their mainstream but low profit lines. Kaz has only been on the job a few months and this quarterly report seems to be an early indicator he is going in the right direction.

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Sony Increases Sales but Misses Revenue Estimate

Sony (NYSE: SNE ) reported earnings on Nov. 1. Here are the numbers you need to know.

The 10-second takeaway For the quarter ended Sep. 30 (Q2), Sony missed estimates on revenues and missed expectations on earnings per share.

Compared to the prior-year quarter, revenue expanded slightly and GAAP loss per share contracted.

Gross margins dropped, operating margins expanded, net margins expanded.

Revenue details Sony booked revenue of $20.60 billion. The six analysts polled by S&P Capital IQ anticipated revenue of $21.25 billion on the same basis. GAAP reported sales were 0.9% higher than the prior-year quarter's $20.43 billion.
http://g.foolcdn.com/img/editorial/t...2012-09-30.png
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details EPS came in at -$0.20. The one earnings estimate compiled by S&P Capital IQ predicted $0.21 per share. GAAP EPS were -$0.20 for Q2 compared to -$0.35 per share for the prior-year quarter.
http://g.foolcdn.com/img/editorial/t...2012-09-30.png
Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details For the quarter, gross margin was 22.5%, 130 basis points worse than the prior-year quarter. Operating margin was 2.1%, 30 basis points better than the prior-year quarter. Net margin was -1.0%, 70 basis points better than the prior-year quarter.

Looking ahead Next quarter's average estimate for revenue is $24.80 billion. On the bottom line, the average EPS estimate is $0.67.

Next year's average estimate for revenue is $83.77 billion. The average EPS estimate is $0.08.

Investor sentiment The stock has a two-star rating (out of five) at Motley Fool CAPS, with 1,197 members out of 1,692 rating the stock outperform, and 495 members rating it underperform. Among 369 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 224 give Sony a green thumbs-up, and 145 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Sony is hold, with an average price target of $12.69.

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Sauce

I believe spring of 2013 will look a lot better in terms of graphs and charts. remember that kaz just got rid of a couple of departments, as well as doing a mass layoff. So those will definitely show up next year.

wow this is not looking good.....The PS4 NEEDS to be a HIT or its Sony is in HUGE trouble

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Originally Posted by DeviousOne

wow this is not looking good.....The PS4 NEEDS to be a HIT or its Sony is in HUGE trouble

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The point is that it is not looking as bad as some fanatics wish. Going from "not looking good" to "HUGE trouble" is a giant leap in disjointed logic. If you reviewed the data, it shows Sony is a 80 Billion dollar a year company. Their deflated revenue after the Great Recession has been about the same for several years, just not growing. They both have Springer the Hut's fingerprint on them, but Skyfall is approaching 1 Billion dollars and Amazing Spiderman is over 600 million. There are a lot of divisions that are doing very well. Next year, Japan and Europe will be in recession, and North America will be steadily climbing out of the last recession. Sony is a lot better positioned for the market in late 2013 than some people think right now. Yes, a lot depends on the PS4 and Sony knows it. They are investing a huge amount in it now, lining up all the network components that will make up a next gen console beyond its hardware.

Sony is going good and will recover for sure, but its not as bad as the people are saying.

Well seeing this and sony having there credit rating brought down to junk is not a great sign while yes they are a huge company they can not afford another vita situation with the PS4. I hope things turn into a positive direction.

Financially I do not think the Vita was a huge investment for SCE, it's big, but nowhere near what a home console investment would set them back. Their hesitenancy in slashing Vita's price like Nintendo did the 3DS so drastically also suggests that it's not something that they are desperate to become a hit, just yet, maybe they're okay sitting on the break-even or slight loss/profit atm. Or maybe they're just slow as fuck in reacting, which wouldn't be the first time lol

If you meant they can't afford the thing to be selling at a hilariously low rate like the Vita is then I don't think that's gonna happen either way, not with the PS4 - as long as it's not 599 again, it'll be fine I think

The lack of a price cut i believe just means financially that can not afford to to a hit like that on each vita sold. I agree im sure the investment in Vita is not on a same level as a next gen home system for sony

Ouch..2013 should boost those numbers up a bit more.

Vita is making them more than PS3 hardware wise but it needs games, the PS3 is the opposite, not making much off PS3 but quite a bit through software. 2012 has been PS3s weakest year IMO other than 1 or 2 games, so yeah not bad.

Sony is losing money on hardware when it comes to the vita the Ps3 has been profitable for a while now especially with the ss slim.

Well hopefully these statistics wont rush the PS4 out.

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Originally Posted by Cybertox

Well hopefully these statistics wont rush the PS4 out.

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Good point I hope it doesn't....also I hope it doesn't effect how powerful the ps4 will be rumors are out there the next xbox will be 2-3 times more powerful than PS4

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Originally Posted by DeviousOne

Good point I hope it doesn't....also I hope it doesn't effect how powerful the ps4 will be rumors are out there the next xbox will be 2-3 times more powerful than PS4

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I seriously doubt that will be true.

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Originally Posted by Bligmerk

The point is that it is not looking as bad as some fanatics wish. Going from "not looking good" to "HUGE trouble" is a giant leap in disjointed logic. If you reviewed the data, it shows Sony is a 80 Billion dollar a year company. Their deflated revenue after the Great Recession has been about the same for several years, just not growing. They both have Springer the Hut's fingerprint on them, but Skyfall is approaching 1 Billion dollars and Amazing Spiderman is over 600 million. There are a lot of divisions that are doing very well. Next year, Japan and Europe will be in recession, and North America will be steadily climbing out of the last recession. Sony is a lot better positioned for the market in late 2013 than some people think right now. Yes, a lot depends on the PS4 and Sony knows it. They are investing a huge amount in it now, lining up all the network components that will make up a next gen console beyond its hardware.

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Kaz interview, he says "ummmm" a lot but while laughing I understood exactly what he plans on turning sony into and his goals in the TV market in this specific interview.

I do believe he will turn sony around, it's already started and he's been doing an amazing job so far trying to get Sony out of the shit they were and are currently in since Stringer.

http://youtu.be/DHqCntFFbHk

here are some more vids.

http://youtu.be/zv_Q2zzo46k

http://youtu.be/-l5lSF-5hSU

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Originally Posted by DeviousOne

Sony is losing money on hardware when it comes to the vita the Ps3 has been profitable for a while now especially with the ss slim.

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Do you have a source on Vita losing money? Reports say that it costs little over $150 to manufacture them and even with their $179 Black Friday they were still raking it in. The only thing you might be referring to is getting back the R&D, but the hardware is profiting.

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IMO they didn't get rid of Stringer soon enough.

I did read it somewhere however ill see if I can track it down. It may have been in regards to the 3g model only honestly not sure so ill do some research and post anything showing if they are losing or making money on the hardware

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Originally Posted by Bligmerk

...immediate bankruptcy

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You’re a bit late with the fiscal analysis, but I wouldn’t bet against a potential failure or systematic breakup of the Group in the coming years. Hence why the business was awarded junk status last month; there is limited market confidence in Sony turning things around in an appropriate manner.

Over the last few years Music, Pictures and Financial Services have kept the business afloat, but put quite simply: Sony needs to undertake immediate wholesale and drastic actions to downsize and prioritise on a select number of products and services that have high margins and/or strong market penetration and presence. That will involve the sale or closure of entire product lines or divisions, but a leaner and more refined Sony (with perhaps 30-40,000 employees) would be a far more proactive enterprise, and thus more likely to have a long-term and viable future. My concern (and that of the market) is whether this materialises.

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Originally Posted by Bligmerk

If you reviewed the data, it shows Sony is a 80 Billion dollar a year company.

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Unfortunately how Sony has allocated and spent its monies (and other funds) over the years is at the core of its ongoing issues; it has essentially not spent wisely and avoided advancing the really difficult decisions to radically alter the composition and direction of the Group in light of changing consumer appetites’, the global economic climate, debt, market share evaporation and haemorrhaging of cash.

Two critical issues come to mind: (i) gross debt (excl financial services) increased to ¥1.25trn (Sep 12) from ¥1.15trn six months previously, and (ii) cash & deposits declined to ¥0.42trn from ¥0.72trn over the same period. Sony’s ongoing turgid financial performance resulted in the recent decision to downgrade Sony to junk status.

For that reason, Sony has a market cap edging towards the sub-$10bn mark; while Samsung is $200bn+.

Jo, are you ever going to join us in conversations that don't involve your predictions of gloom and doom? ;) When you grace us with your participation, it's always in the sales threads.

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Originally Posted by Ghost-Rhayne

Jo, are you ever going to join us in conversations that doesnt involve your predictions of gloom and doom? ;) When you grace us with your participation, it's always in the sales thread.

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It's not really a prediction of doom and gloom, more an accurate portrayal of the actual position of the Sony business utilising my background and knowledge.

If you want to talk in further detail about ratios and other metrics, then I have no issue, but producing erroneous analysis or rose-tinted perspectives isn't really positive for anyone.

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Originally Posted by Jo-san

It's not really a prediction of doom and gloom, more an accurate portrayal of the actual position of the Sony business utilising my background and knowledge.

If you want to talk in further detail about ratios and other metrics, then I have no issue, but producing erroneous analysis or rose-tinted perspectives isn't really positive for anyone.

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Most of us here are gamers, not economists or accountants. I would rather insert Move in the southern orifice than talk ratios or metrics...If Sony is going to crash, it won't be any time in the immediate future, and gaming is better than ever right now, so I think what's positive for everyone is talking about those games.

Sales are of course an interesting subject to talk about, but we have other sections and threads here ya know. ;)

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Originally Posted by Ghost-Rhayne

Sales are of course an interesting subject to talk about, but we have other sections and threads here ya know

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I don't believe Sony is likely to go bust in the next twelve months; but the situation is becoming more precarious to the point where a seismic event is likely to occur that has deep ramifications for all divisions including gaming.

Yet in the coming months, Sony's short-term viability will ultimately be reliant upon the US fiscal cliff, contagion in the Euro-zone and emerging & periphery market growth remaining turgid.

Eitherway, I'm not forcing you to post in financial orientated threads.

Are Sony also still struggling with there TV division and wasnt the PSP GO a bit of a failure outside Japan or the other way??

at some point last year, a few posters, me included argued that Sony were looking at things the wrong way, that they needed to downsize, sell business that were not doing well, concentrate on what was working, and chase profitability in the gaming market as opposed to marketshare. We also argued that if they continued on the loss making venture they had become, they would not meet their obligations to bondholders, diminish their reserves and that might have an impact their credit rating and just how much they pay when it comes to borrowing.

We were rubbished by a good number of posters, but that is the exact same thing that has happened for the better part.

Sony are industry leaders. Regardless of what the skewed numbers say.

They're leading in innovation and are putting out cutting edge experiences across the board. I fully expect them to have a great generation with the PS4.