Sony loses $1.7 billion

This is massive news. As recently as October Sony were predicting a profit, now they have made their first loss in 14 years. Already they have an austerity programme in place with company wide redundancies. And their cash shortage has forced them to raise new capital in the middle east and to sell off parts of the company.

Two bits of Sony are in especial trouble, their mobile phone joint venture with Ericsson, which has seen a 23% sales slump. And their Playstation division. From being runaway leader in the last console generation Sony are now running third and last in this generation with nothing in sight that could improve matters. Some analysts have said that the Playstation PS3 losses are so great that they have more than cancelled out the previous profits made by earlier Playstation models.

Sony are in trouble because they have no big, successful product differentiators. In fact for much of what they make you can buy a better equivalent for less money. The Xbox 360 is a prime example and many consumer electronic items from Samsung and LG are further examples. The high value of the Japanese yen is making this even worse.

There will now be a massive restructuring at Sony. It is a matter of survival. They need to find a way back to giving customers what they want, to innovating and to running the business more commercially. Things are so bad that you must wonder whether they have the will and resources necessary to produce the Playstation 4.


  1. Sony have always relied on their brand and high end electronics to sell their goods, but in this economic climate asking consumers to pay high prices is difficult (especially given the high yen price). I heard all Sony goods went up by 33% to retailers recently, further squeezing those tight margins.

    The PS3 is too expensive in a market where you can buy both its rivals at the same time for less money. A price drop may not be the answer, as I doubt they are even making money on the console itself, but they must be desperate to increase the install base and make greater headway into the lucrative software licensing side of the industry that made the PS2 so much money.

    Sony’s first steps will almost certainly be layoffs and production outsourcing.

  2. I think you’ll find that the Playstation 3 is the “official” leader.

  3. BD how is it the official leader? It trails in sales in the USA, it only has a third of Microsoft sales. It passed Europe this past Christmas season. But in reality it already was truely in the lead. Why? Because Sony said they include Africa, and Russia in sales. Microsoft does not. So you are not comparing apples to oranges. Worldwide Sony has sold 17 million and Microsoft over 28 million.

  4. So Sony see themselves as industry leader but only if you don’t count software sales or install base?

    In other words, if you discount all the things every other person in the world would count the industry leader as.

    Wii is leading in hardware, and 360 is leading in terms of software sales per box. Convenient for Sony isn’t it that these things “don’t matter”

  5. Hi Bruce, do you think the fact that Ken Kuturagi leaving sony has contributed to their poor execution and planning for Ps3?

  6. Saveed,
    Maybe KK was the problem.
    He was promoted to be in total charge of the PS3.
    Lots of very bad decisions were made.
    Then he lost his job.

  7. DB that is a irrational reasoning. If you lag in graphics, games, sales, your not a leader but a trailer. When Ken. K. left the company (or was kicked out) the PS3 had already been planned and released! So he was part of the problem.

  8. Here’s what Sony needs to do:

    1. Make a Playstation 3 v2.0, with simpler components, a regular processor, more RAM, a redone archetexture, and with Playstation 2 + Playstation compatability.
    2. Fire their marketing division and get it outsourced.

    That will fix things pretty fast. They may not be able to afford a redesign, but they NEED to. Obviously it has to be a redesign that would allow any games to work on the old and new systems, but as it stands, the system is too expensive to make, too hard to develop for, and has severe memory limitations from what I’m hearing.

    What do you think Bruce?

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