PlayStation 4 Still Bright Spot Amid Staggering Sony Losses

by Mike Futter on Apr 30, 2015 at 03:38 AM

Sony has confirmed its forecasted shortfall of ¥126 billion ($1.05 billion) for the fiscal year ending March 31, 2015. The company is hopeful for significant turnaround in the coming year though, forecasting operating income of ¥140 billion to stop the bleeding.

The company faced significant losses in its mobile communications division totaling ¥220.4 billion ($1.837 billion), but showed positive operating income in its imaging products, home entertainment and sound, devices, film, music, and financial services businesses. All of these showed growth over the previous year.

Game and Network Services continues to be a pillar of Sony’s financial performance, with a 25 percent increase in sales year-over-year (adjusted for constant currency conversion). This year saw a write-down of ¥11.2 billion ($93 million) related to the Vita and PlayStation TV.

A write-down is an adjustment on the books to bring previously reported carrying costs for assets in line with market value. Given that Vita shipments dropped to 3.3 million worldwide from 4.1 million the year before, this isn’t a surprise.

Sony’s gaming division accounted for ¥48.1 billion ($401 million), up from a loss in the previous fiscal year of ¥18.8 billion ($156 million). Sony reports that life-to-date shipments of the PlayStation 4 have reached 22.3 million. This is up from a report in March of sell-through (to end users) of 20.2 million.

[Source: Sony (1), (2)]


Our Take
There are a couple of takeaways here. The first is that Sony missed its start of year forecast by ¥76 billion. I’m not confident that the company will close the next fiscal year in the black. It can’t get a quick cash infusion from selling of Sony Online Entertainment again, for instance.

As for shipment numbers of PlayStation 4, this is always how reports to investors are accounted (and not sales to end users). The reason is that once goods are purchased by a distributor, it’s revenue on the books.

For those that have a more difficult time reconciling shipped-vs-sold, know that for hardware (like consoles) the gap between these two is often slim as inventory turnover rates at this point in the console cycle are still quite high. Retailers don’t want to hold too much in inventory, because there are costs associated with that.

In short: this is good news for PlayStation, but it’s only one organ in an ailing Sony body. The mobile business is crushing the company right now and something must be done.