Sony: on the comeback trail -- maybe
Sir Howard Stringer, the new CEO and first non-Japanese leader of Sony, promised to turn the company around. Has he actually turned the ship in just a couple quarters at the helm of this electronics and movie giant?
Well, he's made a start. Sony today reported an 18% rise in profit and that it would end its fiscal year on March 31 with a profit. Particularly notable in the report was the fact that Bravia flat-panel displays were the best-selling LCD displays in the US over Christmas. Sony also shipped 6 million Playstation Portable (PSP) game systems over the holiday season, bringing the PSP installed base to more than 15 million units. But Sony also announced that it is discontinuing making plasma flat-panel TVs as well as its AIBO robot dogs.
The big question is whether the company that invented the Walkman and the Trinitron TV can refocus its efforts to be competitive in today's consumer electronics world. It's nemesis in this comeback? None other than the current US darling, Apple Computer, whom Bear Sterns analyst Andrew Neff says is who Sony always wanted to be". Let's compare the numbers behind both firms.
It's clear that Sony's comeback has only just started, and most believe that Apple is now at one of its peaks in terms of business performance. Sony has some interesting products planned for its coming year, including the launch of its Playstation 3 game console and a 70-inch Bravia LCD TV. But the company also has some problems to deal with, including Sony Pictures poor business performance and a public relations fiasco in digital rights management over at the Sony BMG Music Entertainment joint venture. And the new Sony Walkman and its Connect digital music service still has a long way to go before it puts any type of dent in Apple's iPod steamroller.
I can't yet recommend Sony as an investment yet; there's too much uncertainty still in its cash cow gaming and TV businesses. But there are two events that would make me re-evaluate that position:
Full disclosure: I own no shares of Sony, but do own shares of Apple Computer.
Well, he's made a start. Sony today reported an 18% rise in profit and that it would end its fiscal year on March 31 with a profit. Particularly notable in the report was the fact that Bravia flat-panel displays were the best-selling LCD displays in the US over Christmas. Sony also shipped 6 million Playstation Portable (PSP) game systems over the holiday season, bringing the PSP installed base to more than 15 million units. But Sony also announced that it is discontinuing making plasma flat-panel TVs as well as its AIBO robot dogs.
The big question is whether the company that invented the Walkman and the Trinitron TV can refocus its efforts to be competitive in today's consumer electronics world. It's nemesis in this comeback? None other than the current US darling, Apple Computer, whom Bear Sterns analyst Andrew Neff says is who Sony always wanted to be". Let's compare the numbers behind both firms.
| Sony | Apple | |
| Revenue | $62.0 billion | $38.8 billion |
| Trailing Price/Earnings | 43 | 39 |
| Profit margin | 2% | 10% |
| Operating margin | 3% | 12% |
| Quarterly revenue growth year-over-year | 10% | 65% |
| Quarterly earnings growth year-over-year | 17% | 92% |
| Cash | $3 billion | $9 billion |
| 52-week stock price change | +17% | +105% |
It's clear that Sony's comeback has only just started, and most believe that Apple is now at one of its peaks in terms of business performance. Sony has some interesting products planned for its coming year, including the launch of its Playstation 3 game console and a 70-inch Bravia LCD TV. But the company also has some problems to deal with, including Sony Pictures poor business performance and a public relations fiasco in digital rights management over at the Sony BMG Music Entertainment joint venture. And the new Sony Walkman and its Connect digital music service still has a long way to go before it puts any type of dent in Apple's iPod steamroller.
I can't yet recommend Sony as an investment yet; there's too much uncertainty still in its cash cow gaming and TV businesses. But there are two events that would make me re-evaluate that position:
- A great Playstation 3 (PS3) launch. If Sony can ship five million PS3s in its first month or two of availability, that will demonstrate that its Playstation franchise is likely to survive XBox 360s threat. That would bode well for years of console sales and profits.
- Striking a deal with Apple on music. Sony has done deals with technology providers like Palm before to bring outside technologies under a Sony brand and experience. Such a deal with Apple is probably the only way Sony will avoid being a minor player in the digital music revolution for years to come. But if Sony can muster the courage to pull it off, it could return some of the shine to the company.
Full disclosure: I own no shares of Sony, but do own shares of Apple Computer.
Technorati Tags: Analysis, Apple, Consumer Electronics, Financial analysis, Flat Panels, Games, Gaming, HDTV, iPod, LCD, Marketing, Opinion, Plasma, Playstation 3, Sony, Technology, TV, XBox 360
posted by Carl Howe at
4:53 PM
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