Sony stock drop follows price/delay rumors
by Dan Choi 
{ Feb 20th 2006 at 11:39PM }
Rumors of a very expensive and delayed PS3 pushed down Sony stock 3.60% in Japan today.The Merrill Lynch report which pegged the PS3 as a $900 machine (with optional $100 hard drive included) that might be delayed 6-12 months from its long-touted Spring 2006 release window has begun to cost Sony some serious cash in its corporate valuation.
Sony skeptics might find this cause for cheer, but it's not currently known (outside of Sony, of course) what the components of its upcoming system currently cost and what they will eventually go for as the PS3 gets closer to launch... whenever that is. At any rate, Sony evangelists with a little cash of their own might consider this an interesting time to pick up the stock when it's down--if they're as bullish about the stock's future prospects as they are about the game/chip/disc platform. [Sorry, stock watchers, but we're not actual financial advisors, so please don't take this hypothetical situation as professional advice. Thank you.]
[Thanks, baxter madu, YM, Mr Zsasz, The1, Dave, & Felix; quote: CNN]
Reader Comments (Page 1 of 1)
Enigma @ Feb 20th 2006 11:51PM
Good it will be cheaper for me to buy, then I will be rich when it shoots up when the analysts are all proven wrong and the PS3 comes out this year and not for the cost those ANALysts are claiming.
$350 for the BR drive? Someone forgot to tell OSHA that Sony makes their own, they dont need to outsource them.
m3mnoch @ Feb 20th 2006 11:57PM
ha! dan. you make me laugh.
m3mnoch.
Zo?unami @ Feb 21st 2006 12:01AM
I still find that ridiculous.
Near $900 dollars, for what is essentially a game console, defies all logic. I think Sony is trying to push far too much with this brand. They're going to end up crippling it.
People will buy it, sure... it's a PlayStation. But it's going to be coming out of the gate with so many more obstacles awaiting it than its predecessors had faced. Should be interesting to see how they pull this off...
Toji @ Feb 21st 2006 12:02AM
3.60%
Ironic.
- Toji
Dan Choi @ Feb 21st 2006 12:07AM
"ha! dan. you make me laugh."
I try, m3mnoch... I try. =)
Captain Obvious @ Feb 21st 2006 12:08AM
I'm pretty sure analysts have predicted that Sony will announce a loss at the end of their fiscal quarter coming up shortly here (March 2006). If they do, the stock is likely to dip again. And if for some reason the PS3 is not announced or introduced by Spring, that could have some impact too.
fawazr @ Feb 21st 2006 12:11AM
The markets are fickle, but Sony's not helping things by sticking by a hard release date of Srping 2006. They give investors cause for concern when their spokespeople aren't on the same page and one cites a delay due to standards and consortium agreements, while another swears by a Spring release. It also doesn't help when Sony starts making comments that imply a willingness to team up with Microsoft.
Of course, all this baffling behavior could be seen as endearing or, better yet, a sly tactic to keep fans in the dark, but, for the most part, it just comes off as bad business. Furthermore, Sony's been getting a lot of bad press lately and the markets are weary of a $500+ price tag scaring off consumers and limiting Sony's market share for some time to come. And if the $800 or $900 cost for each ps3 is correct (can't seem to find a definite price here), Sony will have to heavily subsidize each system sold, while competing against much cheaper consoles.
DVD playback was a major draw for the ps3, but DVD was already out on the market for a good while before the ps2's release. Blu-ray, on the other hand, is brand spanking new and expensive as all hell. I really wish Sony just went with the Cell processor and left out the whole blu-ray thingy. Personally, I'm willing to pay for an uber game console rather than an uber media center, especially if it keeps down prices and expedites production.
Just as I'd hate to see this year end without the release of the Revolution, I'd hate not to see the PS3 on shelves sometime within 2006.
m3mnoch @ Feb 21st 2006 12:12AM
toji! holy crap! mad stars for you. i didn't even notice that. i'm soooooo gonna quote you on my site.
m3mnoch.
Spartacus @ Feb 21st 2006 12:18AM
If nothing else, maybe this will provoke the silent giant to actually make a few statements regarding their seemingly top secret console just to prevent further damage...
Meanwhile people with large amounts of disposable income, such as Enigma, can buy up Sony stocks now and pray that the Sony doesn't drop the ball. But I know if I was in the market to buy stocks, this one wouldn't even tempt me. Right now that stock price could plummet in the remainder of 2006, it just depends whether or not Sony will release solid information or not. But hey, if you are willing to put your cold hard cash on the line and have your nose far enough up Sony's derri? to think that it's a guaranteed investment, by all means, jump in. Just be sure to remember these words: Title Eleven.
Jim @ Feb 21st 2006 12:20AM
Don't you love how the stockmarket is more like a cossip rumor mill than a business!
Aegis @ Feb 21st 2006 12:20AM
"The Merrill Lynch report which pegged the PS3 as a $900 machine (with optional $100 hard drive included)"
wait wait wait. . . when did Merill Lynch ever say this. From that M-L page report the "$900" looked to be merely be a calculation error.
Also, since that report was of BOM(Bill of Materials) for Sony. i.e. what it cost Sony for the components, since when does it cost $100 for an OEM hardrive especially when its bought in massive bulk like Sony would. I'm sure Sony could get it a lot cheaper being that MS sells their HDD for the 360 for $100 at retail. Regardless there are multiple gaps in logic in M-L analysis, especially considering just a few months ago the same company did an analysis that had the price at $494.
kizza's brother wazza @ Feb 21st 2006 12:20AM
Did the same thing happen just before PS2 launched?
Did these analysts also make similar predictions for sony on both the ps1 & PS2, before their release?
Sony took the biggest risk with PS1 & all the analysts, so called industry experts & skeptics said they were doomed with certainty. They did alright then & I don't see why this won't pay off.
Is this even news really. I thought most companies stocks dropped when they had products that had been in development for a while, then stocks rise or drop according to sales. Looking at sony's history, their stocks will most likely go through the roof after PS3 had released.
Enigma @ Feb 21st 2006 12:27AM
Especially $350 per BR drive... when Sony
manufactures them on their own. Give me a break, that report is all BS. We heard the same overhyped crap from ANALysts about the PS2.
Enigma @ Feb 21st 2006 12:34AM
Spartacus, I was being sarcastic. Regardless, it has nothing to do with my nose up Sony's rear, that is a blanket statement at it's finest. It has to do with a farse analyst shooting prices up when the same company had half the price a few months ago, not to mention those costs are what we would pay if we shopped for the parts. I love how a company whos buisness is to analyse the market, cant do their math right, nor take into acount discounts from ordering in huge bulk. I think these companies do this on purpose just to hurt other companies.
fawazr @ Feb 21st 2006 12:37AM
"Especially $350 per BR drive... when Sony
manufactures them on their own. Give me a break, that report is all BS. We heard the same overhyped crap from ANALysts about the PS2."
Enigma, what are you basing this on? I'd like to think analysts estimates were inflated too, but I have nothing to base that theory on and I certainly couldn't guess how much a BR drive would cost Sony. Do you have an article or some sort of report that gives a more accurate picture of costs for the ps3? If so, please post it.
m3mnoch @ Feb 21st 2006 12:40AM
i think he's talking about the theory that the "n/a" might have been a $100 at one time and they forgot to hit the recalculate button.
tho, as i'm thinking about it, the drive might be $100 retail, but's it's probably not going to be $100 to manufacture.
m3mnoch.
Josh @ Feb 21st 2006 1:13AM
I too love the fact that it's down 3.60%
Dan Choi @ Feb 21st 2006 1:20AM
"'The Merrill Lynch report which pegged the PS3 as a $900 machine (with optional $100 hard drive included)'
wait wait wait. . . when did Merill Lynch ever say this. From that M-L page report the '$900' looked to be merely be a calculation error."
Aegis, I picked up this little assumed nugget from the GameSpot article linked in the Thanks line of the original post. And I quote: "...the $900 price tag presumably includes a $100 optional hard drive, as a breakdown of component costs in the report totals just $795."
http://www.gamespot.com/news/6144600.html
Just something fun to throw in there for those who've been watching. Sorry if it caused any unnecessary confusion.
neale @ Feb 21st 2006 2:03AM
so if its $350 for the drive, how can sony justify sellin a BR-player for like £1000 ($1500 more or less)? the ps3 is a br player with additional features, and it will not sell for £1000.
i dont think blu-ray is gonna take off (mainly its too expensive). it will be very slow in europe, i know of very few people near me that have a HDTV, and the shops are (only) finally getting rid of CRTs completely and replacing them with LCDS/plasmas (yet, there are laods that arent HD ready.)
my dad wouldnt know what a HDTV was if he owned one, and id like to think hes a mr joe average
but prove me wrong sony, and i mite, just mite, stick u next to my 360
idiots... (ML) @ Feb 21st 2006 2:23AM
Did M-L fess up and say the $100 was for the HD (and yet somehow not priced in the 3 years from now price)?
If so, they should have kept their traps shut and said it was an adding error. $100 for a moderately-sized HD? Even if it's a 2.5" HD (and it likely is), that's far too much. FAR too much. I can get a 40GB 2.5" HD on zipzoomfly for $65 retail. Likely OEM price is not much over $30, maybe less since they'll be buying quantity 3M (at least) in the first year.
Retards. Someone take away their press release privileges.
Did M-L ever even bother explaining how their estimated BOM price for PS3 went up from $494 to $900 in a few months? The only thing new is the HD, and they seem to think it's still $800 without that.
How come M-L can get away with such shoddy reporting? Either the first report was negligently inaccurate or the second one was.
To answer the questions above, no, I don't believe that analysts did a breakdown on PS1 costs before it came out. Sony wasn't a player in the video game business, and no one knew PS1 would mean so much to Sony. After PS1 came out in Japan there was much speculation about how much the PS1 would cost in the US and whether it coming out at $299 would be dumping. So some people apparently thought the PS1 COGS (Cost of Goods) was rather high. I have to say from my experience and statements from sources at Sony that costs were well in line with the selling price on the PS1.
I'm so jazzed for E3 now. It's obviously going to be a really big deal this year. PS3 and Revolution appearing, plus 360 making its first appearance in final form and in force.
mofomojo @ Feb 21st 2006 2:26AM
Gaming is getting so much more expensive these days, it's not that gaming was ever cheap, it's that the cost of gaming is ever going up, my question is, when will the cost ever go down?
Darth Pixel @ Feb 21st 2006 2:35AM
Umm, are you manufacturing news?
First, NYSE is not in Japan, it's in New York.
Second, this isn't Sony's stock, but Sony's American Depositary Receipt, which usually vary a lot more than Sony's stock.
Third, this kind of "drop" occurs often in Sony's American Depositary Receipt. For instance, it "dropped" from nearly $50 to nearly $47 on Valentine's Day.
Please don't try to make sensational news out of nothing.
jon @ Feb 21st 2006 2:51AM
While waiting for PS3....
Tommorrow Fight Night Round 3 comes out for the 360. Turns out that was the only real game that Sony was showing off at E3 for the PS3! Ha! It's on the 360 before the PS3 even exist.
Releases In March for the 360:
---------------------------
Ghost Recon Advanced Warfighter
The Outfit
BurnOut Revenge
BattleField 2
Elder Scrolls Oblivion
Far Cry Instincts
Dan Choi @ Feb 21st 2006 3:00AM
"Umm, are you manufacturing news?"
Umm, no, Darth Pixel. But if you're saying that this is a non-story based on a reference to SNE on the NYSE, that's how Yahoo News and USATODAY.com referenced the company's stock as well [see the Thanks line credits for where I got these two sources]:
http://news.yahoo.com/s/nm/20060220/tc_nm/sony_playstation_dc
http://www.usatoday.com/money/industries/technology/2006-02-20-sony-ps3_x.htm
For the 3.6, 3.64, and 4% drops (depending on how you round numbers) in the Tokyo Stock Exchange listing for Sony, check the other stories linked in the original Thanks line and Read link from Reuters, Bloomberg, GameSpot, and BBC NEWS. Here's a handy link for that particular stock overview (which I suppose SNE tracked fairly well, at least for Monday):
http://today.reuters.com/stocks/Overview.aspx?symbol=6758.T&chart=1
soupbun @ Feb 21st 2006 5:16AM
only 3.6% and you want to buy? I think it needs to drop by 10% before it even looks kinda cheap.
Antec @ Feb 21st 2006 7:11AM
in my opinion i dont think Sony is going to release the ps3 anytime soon.
there has been ZERO advertising for it.
remember the mountain dew every 10 minutes campaign for the xbox 360? that was 4-5 month before it was even released. Sony used to be the kings of marketing their products (especially the playstation), so them showing nothing at all just further fuels my speculation. them saying nothing at all is hurting them, which is apparent by the Merril Lynch report.
Jeremy Wright @ Feb 21st 2006 9:07AM
Before investing I'd wait for it to drop more. Honestly. The only sign of an overall improvement in Sony stock would be POST PS3 launch. So there is still lots of room for it to fall IF this is related to the PS3.
Remember, MS stock dipped before the 360 launch as well, and there were no indications of anything wrong there (maybe the stock market is psychic though).
LaughingTarget @ Feb 21st 2006 10:20AM
There are four factors that make a stock rise or fall:
1. Future expected profitability
2. Risk of profits
3. Timing of profits
4. General market conditions
Lets look at Sony right this moment:
1. Sony's profits are mainly bolstered by their strong motion picture business. The problem with this being their #1 profit maker is that the movie business is the most fickle of anything that Sony is into. A $100 million budgeted movie could easily flop, or a $20 million budget could hit the jackpot. Combine this with their music business, which is taking a hit from their recent security trick and the guaranteed loss from their electronics division leaves only Sony's traditionally stable Playstation department to pull in the profits.
Because the PS3 is so covered under wraps, combining with a drawing down of PS2 software sales as the anticipation leads up to the PS3 launch (as was seen with Xbox software before the 360), will leave this department with lower than expected cash flows. The electronics will take a loss and the music will not be as profitable as it was last year, leaving the unpredictable motion picture business in the mix. Investors are expecting Sony cash flows to be much low this year, which will drive stock prices down.
2. The longer the PS3 is delayed, the more of a risk it becomes. Listing available titles for the 360 in the coming few months, with PS3's launch date unknown, is DEFENITELY something that Sony investors worry about, and is a very legitimate aspect to mention. It is important to remember that the main draw of a console is the much lower cost when compared to a PC, so PC ports, especially in prime US and European markets, are big draws.
Outside the "hardcore" demographic, which is very small, the console gamer does not really think about owning a game that is 12 months out. Average Joe Smith won't be thinking about Killzone 2 launching in March 2007 when Ghost Recon is on the shelves now. And with the developer houses winding down PS2 game development, Average Joe Smith sees the 360 and it is mighty tasty.
For investors, ever day the PS3 is not on the market is another day that the competition, the 360, gets more customers and a bigger market share. To shareholders, this brings in risk that Sony may have a hard time brining their Playstation division's profits back up to the same levels as the PS2. Smaller market share = fewer profits.
3. Timing is also important to consider. Investors want as much cash as possible, but also as early as possible. Let me just theorize two options:
Option 1 - Sony leaves the BluRay in the unit, but it is delayed 12 months.
The cash flows are as follows (totally theoretical)
2006 - -100
2007 - -200
2008 - 300
2009 - 600
2010 - 900
2011 - 1500
Present value of these cash flows comes to $1,821.42, assuming a conservative 12% opportunity cost. This is also assuming that BluRay actually takes off and people buy a PS3 as a BluRay player.
Option 2 - Sony doesn't wait until the BluRay is finished and releases it 12 months earlier than it could have with the unit. The cash flows will be different because the unit will likely be less expensive and can sell more initially, but Sony will lose a bit at the end from the loss of BluRay compatibility (again, assuming BluRay is successful).
2006 - -200
2007 - 500
2008 - 600
2009 - 900
2010 - 1200
Present value is $2,132.99, which is clearly more than Option 1.
These are both being based on 5 years on the market with Option 1 garnering an additional $100 loss for the current year to simulate additional BluRay development. If you just calculate actual income, Option 1 actually is more than Option 2 on the straight line, but investors don't much care for straight line profits, but adjusted profits to today's currency when compared to other investment opportunities.
Of course, if the BluRay is a failure, the long term profits for Option 1 will always be lower than Option 2 because of the higher initial cost and 1 year delay in the income. The investors likely want Sony to leave out the BluRay and launch the thing next month as opposed to next year.
4. General market conditions. These actually favor Sony right now because of the positive Japanese economy as a whole, as well as a positive economy in the USA, which is the primary buyer of Japanese goods on the international market.
So, it is mostly investor perception. There are investors doing little calculations like in part 3 as well as thinking of various risks to Sony's overall profitability. Delays in any product will always hurt the company's stock prices. Investors are likely getting more skittish every month the PS3 is not on shelves for the public to buy, which will not benefit stock prices at all, especially during this current quarter before the prime movie season starts in May, meaning little income for Sony.
Oncnawan @ Feb 21st 2006 10:25AM
kizza:
"All I've got to say to people that own 360's is, if you have it, why are you posting little typing posts on an internet site instead of playing your console?
Either your not really gamers, or the 360 has not got too many captivating titles on it."
Or people post from work, or they are sharing the 360 with family members, or the T.V. is being occupied by other media, or they decide to not play rated M games in front of small children, or they have some discipline and a variety of interests and thusly don't play video games every available moment. Try stepping outside of your own paradigm, it can be refreshing.
MarxMarvelous37 @ Feb 21st 2006 10:27AM
[Kizza] "All I've got to say to people that own 360's is, if you have it, why are you posting little typing posts on an internet site instead of playing your console?"
Uh, maybe cuz they're at work? ;-)
SuicideNinja @ Feb 21st 2006 11:39AM
"Near $900 dollars, for what is essentially a game console, defies all logic. I think Sony is trying to push far too much with this brand. They're going to end up crippling it. "
That's what it seems like to me as well. Putting two new technologies in a system and hoping that they will become mainstream is a huge risk. And then doubling the launch price of the next console that drives the company...it doesn't look good to market analysts. It doesn't help that Sony's other divisions have been lackluster as of late either.
As far as buying SNE (Sony stock ticker) it isn't low enough. SNE has always been around $50 - $60 a share every time I've looked it up. Buying Sony would be a mistake anyway. When companies get too big, there is little room for growth and less money to be made by shareholders. Same deal with MSFT. Just because a company produces a good product, that doesn't mean shareholders make a lot of money. Tech stocks are STILL in the process of recovery as well!
Jeremy Wright @ Feb 21st 2006 11:57AM
"Uh, maybe cuz they're at work?"
Now, I wonder why HE didn't think about that... Hmm... ;-)
m3mnoch @ Feb 21st 2006 12:33PM
work? what's that? lord, poor kizza is becoming the whipping boy, ain't he?
heh. also, someone should tell laughingtarget that he should be playing his 360 instead of writing useful posts for the rest of us. noob anyway.
never thought there'd be a full on cash flow analysis on joystiq. bravo.
m3mnoch.
SuicideNinja @ Feb 21st 2006 12:45PM
"All I've got to say to people that own 360's is, if you have it, why are you posting little typing posts on an internet site instead of playing your console?
Either your not really gamers, or the 360 has not got too many captivating titles on it. "
I play my 360 when I get home from work until it's time for bed. Some of us have day jobs you know, and use our breaks to check out what's new in the industry.
For someone bagging "fanboys", doesn't your following statement seem a bit idiotic?
"US $399-$499 max at launch. Thats the stone cold facts, cause I said so."
'cause you said so, eh? Sounds like the epitome of what you are complaining about.
"Argh, did you even watch the e3 footage for PS3. The footage I saw was not playable & looked like cut scenes that could be manipulated by the controller."
The unpolished Xbox 360 demo version DOES look like that. Even PSM said it looks really good and that 360 version does lighting better while the PS3 seems to capture facial subtleties better.
From my point of view, my Playstation 2 is the LEAST "captivating" console I own. Between the weaker graphics and annoyingly placed loading times, is something called frustration. Not to mention that the PS2 doesn't really have much for 3+ multiplayer games. Even the Gamecube can get four people intensely playing together!
That doesn't mean I don't enjoy some PS2 games, but if a game is available for a different system I always go that route. Sony has disappointed me with the PS2; I'm waiting for them to redeem themselves with the PS3. As always, they make it sound excellent, but I'm holding back until they live up to their promises this time.
Microsoft's only problem is consumer reach. It seems to me that a lot of people know about the XBox, but not many have played them and just assume that what they are familiar with (Playstation) is the best. When we have visitors, they are always intrigued by the Xbox and/or the 360. I always offer to let them play. No disappointments yet.
Inferno @ Feb 21st 2006 2:43PM
I noticed there are several people who think that because Sony makes Blu-Ray players, that they won't be expensive to produce. Each drive costs Sony for part, labor and equipment. If stand alone BR-DVD players are going to start selling in fall '06 for over $1000, what makes you think the drive will be cheap to produce?
I personally love gaming. I initially planned to buy a 360 and PS3 on initial release. But I honestly don't care about Blu-Ray, and from what I have read about the format war, I personally think HD-DVD will win that battle. And because I don't care about that aspect of the machine, why would I pay more for the capability when it isn't going to make the games any better. There is a marginal gap in processing power between the 360 and PS3, by all accounts I have read. But like the Xbox/PS2 battle, that didn't become too obvious until 2 or 3 years after release.
I may have to wait for the price to drop a couple times on PS3 before I buy one. I have a feeling it will be $450-$499 w/o the Hard Drive. They will try to show their console as far superior to 360, therefore worth the extra $50-$100, and all the crazed fanboys WILL buy them up. Hell, how many people payed $600 or more for the 360 on E-bay. Then, shortly after, when sales slow, they drop the price, I say within 6 months (longer if supply doesn't meet demand, like the 360).
Dan Choi @ Feb 21st 2006 5:54PM
"never thought there'd be a full on cash flow analysis on joystiq. bravo."
Agreed, m3mnoch. That was a crazy (good!) amount of actually relevant analysis there, LaughingTarget. Methinks that kind of contribution deserves a(nother) star, don't you? =) Thanks for posting it!
m3mnoch @ Feb 21st 2006 7:06PM
a big hell yeah for laughingtarget to get another star! stars all around! stars for all my friends! i'm buying!
oh. wait. nevermind. i gots pockets, but no stars.... dan, if you can spot me this time, i'll getcha on the backside.
m3mnoch.
Dan Choi @ Feb 21st 2006 7:37PM
"dan, if you can spot me this time, i'll getcha on the backside."
Well, I don't know about the backside, m3mnoch, but it is hard to refuse a friend..... Eh, why not? But just this once, mind you! ;)
LaughingTarget @ Feb 21st 2006 8:12PM
Yay, I feel loved.
Well, I figured I should bring a little of my expertise to the table on the subject. It is good we all learn from everyone's perspective.
Dan Choi @ Feb 21st 2006 8:23PM
"...It is good we all learn from everyone's perspective."
Truer words were never spoken, LT. Expertise is appreciated so long as it's expressed in a reasonable and non-threatening manner (which you managed to do with flying colors). Efforts such as yours are to be applauded and encouraged, with stars--and any other positive form of feedback that can be put out there--freely given. Thanks again for the way in which you wrote your post, which can be just as important online as the info you presented.