What's new

Another Myth Busted: Sony is Having A Good Financial Year! (1 Viewer)

Lee Scoggins

Senior HTF Member
Joined
Aug 30, 2001
Messages
6,395
Location
Atlanta, Georgia
Real Name
Lee
I looked up Sony's stock price performance on Bloomberg. They are up a lot over the industry index so I think investors are betting they are in the midst of recovery.

It's too bad I didn't buy stock of Sony, it's one year performance according to Bloomberg is 81%!
 

John Kotches

Senior HTF Member
Joined
Mar 14, 2000
Messages
2,635
I guess it's all a matter of how you want to spin things.



Here's what the NY Times reported yesterday morning...


So, the 4th quarter results show a net operating loss and profits are down by about 25%.

To me, posting a loss is a bad quarter, and net profit dropping in the vicinity of 25% in an improving economic climate are not positive things...

I'm just curious how some could paint rather sobering numbers in a positive light.

Cheers,
 

Lee Scoggins

Senior HTF Member
Joined
Aug 30, 2001
Messages
6,395
Location
Atlanta, Georgia
Real Name
Lee
I think these are the key results:



So music is doing okay and offsetting losses in consumer electronics. I would not read too much into the net income line as this is after one-time events like restructuring charges. The better analysis is probably to back out the restructuring expense and compare those earnings to the prior year. I will try to get statements and do this. Still earnings remain strong at almost a billion dollars.

Probably the best guide is what the "Street" thinks as the link below indicates investors have been buying Sony shares.

http://quote.bloomberg.com/apps/quot...=sne&x=13&y=14

I'm encouraged to see good results from the music area. I will try to find more data on this.
 

Phil A

Senior HTF Member
Joined
Oct 1, 2000
Messages
3,249
Location
Central FL
Real Name
Phil
"I'm just curious how some could paint rather sobering numbers in a positive light."

And that is w/o even knowing how much the books were massaged to get the numbers to where they are. They can't do that type of stuff forever (taking back reserves to play games with income, laying off/restructuring, etc.) so if it really does not turn around there will even be worse results reported. It is not just Sony but most of the industry in this shape. Certainly cos. have had much worse years, but this is not a good performance by any means.
 

Lee Scoggins

Senior HTF Member
Joined
Aug 30, 2001
Messages
6,395
Location
Atlanta, Georgia
Real Name
Lee
The definitive statement of earnings can be found at:

http://www.sony.net/SonyInfo/IR/fina...ny20040427.pdf

Here are some highlights plus some items I find encouraging:

1. In spite of the recession in US and Japan, sales increased 0.3% to $72 billion dollars.

2. Earnings beat forecast coming in at $851 million for the year versus $811 million forecast. Earnings were down 23% due to a restructuring charge. Net earnings per share was $0.92.

3. Sales of flat panel TVS and digital cameras offset weakness in consumer electronics (not suprising since this shift has been widely notices).

4. Music did very well considering the environment with $5.384 billion in revenue and $182 million in earnings.

5. In terms of segments, Electronics had a loss that offset by earnings in Games, Music, Pictures and Financial Services. The Other category had a small loss.

6. In the 2005 outlook, Sony expects sales from Music to be down but operating earnings to be up as a result of the restructuring.

7. Restructuring charge of 2.117 billion yen and a 44.7 billion loss in an affiliated company explains most of the earnings decrease of 23%. These are one-time items. On an operating income basis, Sony was down just a bit from 157.5 billion yen to 122.3 billion yen.

8. Balance Sheet is very strong with $8.0 billion of long-term debt versus $22.9 billion of equity. Moreover they have $8.2 billion of cash so they could wipe out all major debt in total if they wanted.

On balance, I think Sony weathered the storm well. Bottom line: I don't think financial considerations will impact our ability to receive Super Audio technology or Sony redbooks.
 

Lee Scoggins

Senior HTF Member
Joined
Aug 30, 2001
Messages
6,395
Location
Atlanta, Georgia
Real Name
Lee
Also interesting to note: Sony made $329 million from royalty income. If you consider probably some material portion of this is from Super Audio licenses, then the profit picture from hirez starts to look reasonable.

In the comments to the Music segment results, they talk about how Sony benefited from lower advertising and promotion expenses. I suspect that we have seen little marketing effort due to the company's desire to keep these costs low.



Phil, I don't think it is fair to assume that any one company is manipulating the accounting numbers. Worldcom, Nortel, and the Enrons of the world are the exception to the rule. In particular the Japanese are generally fairly conservative with respect to large firm accounting based on my experience in Tokyo banking.
 

Paul.S

Senior HTF Member
Joined
Mar 29, 2000
Messages
3,909
Location
Hollywood, California
Real Name
Paul
Lee et al.:

Amplifying somewhat on John's post #s 5 and 24. The NY Times ran a story on the 21st about the forecasts ("Sony Raises Profit Estimate For Year"). I thought the reference to "foreign exchange gains" was interesting (bold mine in excerpt):

[Sony's deepening hardware "versus" software conundrum is interesting to me: two of their Blu-ray hardware partners (Dell and HP) are competitors in the downloadable music market.]

The L.A. Times ran a story today entitled "Sony's Profit Down 23% For Fiscal Year." Excerpt:

"In Sony's flagship electronics business, which accounts for nearly two-thirds of the company's sales, growing demand for cellphones, digital cameras and flat-panel televisions failed to make up for waning interest in traditional TVs and portable audio devices."

This seems to controvert your item 3 in your post #27?

Hollywood Reporter story today: "Sony Fiscal Profits Plunge 23%; All sectors except music show weak 4th-quarter sales." Excerpt:

"Sony's electronics unit posted a loss of [35.3B yen] ($322 million), down from its [41.4B] profit a year ago. The company attributed the loss to market-price declines with televisions, personal digital organizers, portable CD players and optical equipment. However, mobile phone, digital camera and flat screen television sales were up, Sony said."

Thanks for the link to the .pdf of the "Consolidated Financial Results" in your post #27, Lee. I saw this earlier (yesterday at work) and thought of you ("Awwww") and a question I wanted to ask.

Setting aside the financial minutiae (which I find kinda dry; I'm more excited about the products themselves), I was struck by the absence of any explicit reference in the Consolidated Financials to SACD. Do you find it curious/noteworthy that even in Sony's own financial reporting there is no reference to their SACD product? No tracking of sales? No comment about their vision of the product's future? It seems odd to me.

-p
 

Lee Scoggins

Senior HTF Member
Joined
Aug 30, 2001
Messages
6,395
Location
Atlanta, Georgia
Real Name
Lee


Don't be. Most operating strategy is left out of these things. However, you can look at Sony news stories and find two things: (1) they are really excited about the super-premium Qualia line which includes Super Audio abilities, and (2) they really pushed SACD at the East Coast lineup where they unveiled their products for the Electronics segment. They appear to be as firmly behind Super Audio as ever.

Again, the problem with focusing on the net earnings here, as I hoped to prove, is that you miss the underlying businesses are healthy and earning a profit. Most of the loss came from equity in an affiliated business. I am trying to get some understanding of what that is.
 

Lee Scoggins

Senior HTF Member
Joined
Aug 30, 2001
Messages
6,395
Location
Atlanta, Georgia
Real Name
Lee


Paul,

This was BEFORE they released earnings. The PDF link is the final April 27th earnings report. It is clear that foreign exchange gains had minimal impact. If you go to page F-4 you will find FX gains of $174 million versus operating income of $1,176 million.

So I guess that quote was not justified. :)

The big item turns out to be a loss on the Sony-Ericsson deal which is done with. That impacted earnings to the tune of -$44.69 billion yen.
 

Phil A

Senior HTF Member
Joined
Oct 1, 2000
Messages
3,249
Location
Central FL
Real Name
Phil
"Phil, I don't think it is fair to assume that any one company is manipulating the accounting numbers."

Lee, there is not a company (not just Sony or one co.) that does not do some manipulation. There is just too much money on the line along with too many gray areas for them not to. No not every co. is a Worldcom or Enron but to think that what they report is as simple as I have a dollar in my pocket and I spent $0.44 and I have $0.56 left is just not facing reality. Sony wants to sell their story to the brokerage houses to drive up the price of the stock. It may well be that they are doing better than the rest of industry in certain areas. In relation to other cos. in the industry it may be a better stock value.

"I was struck by the absence of any explicit reference in the Consolidated Financials to SACD. Do you find it curious/noteworthy that even Sony's own financial reporting there is no reference to their SACD product? No tracking of sales? No comment about their vision of the product's future? It seems odd to me."

Paul, most cos. would put products and new technologies along with fancy pictures in their annual reports to shareholders vs. what is filed with the SEC. However, for 2003, http://www.sony.net/SonyInfo/IR/fina..._ar2003_04.pdf

Sony World info which covers the whole range of their products from the annual report makes no mention of SACD either. Blue-Ray, which was more or less getting started in consumber products, is mentioned. I think it is obvious that they don't want to show lots of stuff related to the SACD format. It should be interesting what happens when the 2004 annual report comes out.
 

Lee Scoggins

Senior HTF Member
Joined
Aug 30, 2001
Messages
6,395
Location
Atlanta, Georgia
Real Name
Lee


Come on Phil...do you really think Sony does not support Super Audio (one of their major investments) just because it is not mentioned in a products description?

Should we think Warner is abondoning DVDA if there's no mention in THEIR annual report?

I think a better indication is strong support given that they have built it into the Qualia brand and they talk about it a lot at CES and HE events.
 

Chu Gai

Senior HTF Member
Joined
Jun 29, 2001
Messages
7,270
Well that's pretty dead too. Numbers I saw from maybe a year or so ago were that vinyl outsold DVDA by about 6:1 and vinyl is pretty niche. Something will emerge, after all, Something Wicked This Way Comes, eh?
 

Phil A

Senior HTF Member
Joined
Oct 1, 2000
Messages
3,249
Location
Central FL
Real Name
Phil
Lee, GAAP (generally accepted acctg. principals for anyone who is not sure) are just overall guideless that have nothing to do with the underlying transactions I was speaking about. Enron and Worldcom has their books certified by acctg. firms that are among the biggest and most respected in the world. It is not a simple task to look at every ledger or journal entry. As I noted, often the acctg. dept. of the client contains former employees of the auditors not necessary making for the most impartial results. There is no black and white on many issues, especially the unique qualities of the music and entertainment industry with royalties (e.g. what gets capitalized, what gets expensed), film libraries, master tapes, etc. There are even special and crazy laws and rulings. Calif. exempts food for human consumption from sale tax. There is a ruling of the stty. gen'l going way back that says the lease of cattle is exempt from sales tax since cattle is food for human consumption. The real reason is that the movie studios lease cattle to make westerns. I promise not to tell you how to build a microphone tree, please don't try to tell me what I don't know from 25+ yrs. experience. I love SACD, have 140 of them, but facts are facts and reality is reality.

The music industry is hurting and I don't believe that any of the majors wants to be lots of stuff that they can get questions on (e.g. HD MD vs. what else might be out there and doing better). As for the Warner annual report for 2003, it specifically mentions they sold the music group and has little inforation about that business although they talk in great detail about other lines of business and I'm sure given the state of things are happy to be out of it and not just for DVD-A vs. SACD. So just for the record you said "Should we think Warner is abondoning DVDA if there's no mention in THEIR annual report?" and I think I answered it.

I never bash Sony, Warner Music or any other co. (or individual). I may complain about lack of software and releases to support hi-rez, but so do many people. I also prefer to wait for facts. I noted the 2003 annual report for Sony and reserved judgement on 2004 until I see it. Shooting from the hip w/o facts is not always good. I was responding to someone who noted they did not see mention of SACD in the earning release and pointing out where that stuff would be more often than not. I was not saying anywhere that Sony is abandoning anything. Putting words in someone else's mouth is also not necessarily a good thing.
 

Lee Scoggins

Senior HTF Member
Joined
Aug 30, 2001
Messages
6,395
Location
Atlanta, Georgia
Real Name
Lee


I don't believe I did this, but you did say "I think it is obvious that they don't want to show lots of stuff related to the SACD format." This isn't exactly waiting for the evidence as you profess to want. You are making a statement that indicates lack of support for the format.
 

Phil A

Senior HTF Member
Joined
Oct 1, 2000
Messages
3,249
Location
Central FL
Real Name
Phil
"Both the tone and the examples here clearly indicated to me that you were skeptical about Sony's commitment to Super Audio." - Lee I was merely stating fact (something I personally have no problem with though I realize others may not fee the same). I also indicated " It should be interesting what happens when the 2004 annual report comes out." The hurting state of the music industry in general makes it much better to emphasize other areas of the business, not just for Sony. Your statement that "I did not say you were but you are clearly questioning the commitment based on the above comments" is totally silly. Stating what facts are in their 2003 annual report related to products and indicating 2004 should be interesting says nothing about committment or lack thereof. As I noted I was answering someone's question as to why SACD did not show up in the earning statement. Your statement are your own words and inventions and I have no problem with them but I think you should take a hard look and stop attributing non-existment statements to other people. It is much nicer and takes less effort.

By the way, has Qualia indicated they are doing anything with SACD hardware? Their initial statements had nothing shown in their product line and I have not followed it since.

One further thing - "but by and large the financial statements are the best picture of a firm's continuing cash flow and profits and balance sheet. Sony has a very good reputation for clean statements." I said that Sony is no different from any other big corporation. If you want to believe that they are white-washed 40 times and are clean you can. I would have made the same comment whether the co. involved was Warner or any one else. The perpetuation of top management and compensation depends on good earnings and they will take advantage of every gray area they can to maximize what they show. If that is your definition of clean that is fine with me.

It is OK to love the format. As I noted I have over 140 SACDs and a Modwright Absolute Truth Mod to my XA-777ES which likely cost multiples of what the avg. person into the format spends on a player. You seem to have a horrible paranoia when one states facts in relation to the format. There are good and bad points to everything. It is a hobby and I am pretty much totally satisfied with my system and content to buy the software I like (whether it is SACD, CD or DVD-A) as I can't control what a particular studio will release and am not about to lose sleep over it. Silly statements w/o basis are not going to be the most popular. More people on a forum such as this are likely into home theater and probably like the DVD-A format better for that reason. It is only natural. Making statements w/o basis in fact is not going to necessarily get the warmest reception in the world. Even making factual statements won't guarantee that but I think it is better.
 

Lee Scoggins

Senior HTF Member
Joined
Aug 30, 2001
Messages
6,395
Location
Atlanta, Georgia
Real Name
Lee


Well I agree but you have to provide specifics where I made statements without basis in fact that were also not an expression of opinion. I can't have an honest response to this allegation without specific examples. I certainly do my best to argue my points based on evidence and clear logic. I think my numeric analysis of the DVDA Council survey is a good example of this.
 

Users who are viewing this thread

Latest Articles

Forum statistics

Threads
356,815
Messages
5,123,817
Members
144,184
Latest member
H-508
Recent bookmarks
0
Top