Decline of

SONY

Sony Ericsson, this morning reported a large Q4 loss, reflecting intense competition, price erosion and restructuring charges. Ericsson is selling its stake in the mobile phone joint venture to Sony, which has renamed the business as Sony Mobile. For the quarter, Sony Ericsson reported sales of 1.288 billion Euros, down from 1.586 billion in Q3, and 1.528 billion a year earlier. Mobile phone units dropped to 9 million, from 9.5 million units in Q3, and 11.2 million a year ago. Gross margin at 24% was down from 27% in Q3 and 30% a year ago. The company posted a loss of $207 million; before taxes and restructuring charges, the company lost $154 million; including restructuring charges, the loss was $247 million. ASP was 143 Euros, down from 166 Euros in Q3, though up from 136 million in the year-ago quarter. Our fourth quarter results reflected intense competition, unfavorable macroeconomic conditions and the effects of a natural disaster in Thailand this quarter, Sony Ericsson CEO Bert Nordberg said in a statement. We are aligning our business to drive profitability and to meet customer needs. In spite of these challenges, throughout 2011 weve shifted our business from feature phones to smartphones and our Android-based Smartphone sales in the quarter increased by 65% year-on-year. The Xperia portfolio, including the recently announced Xperia NXT series, will serve as a cornerstone of our Smartphone lineup in 2012.

As a gamer, I want Sony to succeed because competition helps create and maintain quality products. Having three consoles on the market puts pressure on all three companies to give gamers an amazing experience and I dont believe gamers are better off if any of the three companies dropped out of making consoles. With that said, there is fear for Sonys future. Its not hyperbole when people say Sony is in trouble. Nobody is exaggerating Sonys problems. Its not false gloom and doom. The truth is, theres enough financial data provided to the public to piece together the big picture of Sonys long term problems. I dont pretend to be a financial expert, but I believe the available data shows worrying trends of Sony being in a deep decline for the last 10 years. There is a large group of people who act like Sony is too big of a company to fail. Some gamers think Sony is the same corporate giant theyve always been and that Sony continues to be this giant threat to Microsoft and Nintendo, regardless of their current financial problems. Sonys total liabilities have increased dramatically for the last ten years. Sonys market cap value is more than 9 times less than it was in the year 2000, and their ROA and ROE have also fallen in the same period. The company is drowning in debt and historical net losses. While Sony currently has

high quality products, theres no product at the moment that is really getting Sony out of the red. Currently, the company is compounding more losses while organizational restructuring is going on. For the financial data in this article, I have provided dates to put the data in better context. Please understand that financial data changes constantly, so the numbers will change on the available sources. With that said, dont expect drastic changes because the data I am providing is in a span for 10 years. So if Sony is in a decline for 10 years, their problems will not dramatically change in the near future. Now lets begin.

Sonys Shrinking Market Cap Value Market Cap definition by investopedia.com: The total dollar market value of all of a companys outstanding shares. Market Cap definition by Wikipedia.com: Market capitalization is defined as the share price multiplied by the number of shares in issue, providing a total value for the companys shares outstanding. Below is a chart of Sonys market cap value between September 2002 through September 7th, 2012.

Revival of SONY
Sony is back in the black after posting its first full-year net profit in five years. The company made a net profit of 43 billion ($458 million) in the 2012 financial year an increase on its forecast of 40 billion ($404 million) following a loss of 457 billion ($5.7 billion) in 2011. Operating profit was 230.1 billion ($2.45 billion), up from a 67.3 billion ($820 million) loss last year. RETURN TO PROFIT COMES AMID LOWER REVENUES FOR ELECTRONICS DIVISIONS The return to profit came despite lower revenues for its camera, game, and home entertainment divisions; Sony acknowledged decreased demand for compact digital cameras, LCD TVs, and its PlayStation games consoles. The game and camera divisions reported small operating profits of 1.7 billion ($18 million) and 1.4 billion yen ($15 million) respectively, while the TV and audio division recorded a loss of 84.3 billion ($897 million). The most profitable divisions were the financial services arm, with an operating profit of 145.8 billion ($1.55 billion), and the movie business, which made a 47.8 billion ($509 million) profit. Since the new Japanese government took power in December and implemented sweeping economic reforms that dramatically weakened the yen, Sony is making more money on its foreign sales; shares have also significantly increased in value in the past four months. The company has raised billions more dollars from the sales of its New York City headquarters and a major Tokyo office building. CEO KAZ HIRAI STILL HAS MUCH TO PROVE With a small year-on-year sales increase of 4.7 percent, largely attributable to the consolidation of Sony Mobile following thebuyout of Ericsson's stake in a joint venture, Sony's return to profit is only a qualified success. The earnings report may be good news for the company's balance sheet, but CEO Kaz Hirai, who took the reins a little over a year ago, still has much to prove in terms of shoring up the company's performance in its core electronics business. To that end, Sony predicts a 50 billion ($507 million) net profit for the current fiscal year, with increased demand for the company's smartphones expected to boost profits. Sony expects to sell 42 million mobile phones in the 2013 fiscal year, a 27.3 percent increase on last year, citing "strong consumer acceptance" for the Xperia Z. The company also predicts its camera business will "significantly" improve its operating profit from increased sales of interchangeable-lens and professional-level models. SONY EXPECTS TO SELL 42 MILLION PHONES THIS YEAR

The launch of the PlayStation 4 is also expected to bring in further revenue; while games consoles are typically sold at a loss at launch and incur significant R&D costs, Sony says that this will be offset by increased sales, resulting in "essentially flat" operating performance. Perhaps surprisingly, given the state of the TV market in recent years, Sony also expects a return to profit for its home entertainment division due to the release of "high value-added" sets.