Sony PS3 Biz Up Some, but Division (and Others) Still Gloomy

(MoneyWatch)  Sony just released its fiscal year second quarter numbers (third calendar quarter). Short take: PlayStation 3 unit sales were up by a healthy 33 percent, PlayStation Portable and PlayStation 2 unit sales were down, and VAIO PC sales (now put together with games as "networked products & services") were also down. So were prices, with a net result of the division revenue being down by 24.2 percent. The dismal news held true across the entire company, which raises the question of how long Sony can keep going on like this.

Sony attributed the rise in PS3 units to the new, less expensive model. But it's going to take more than a quarter of pumped sales to do anything for the trend, if you'll look at the following graph:

In addition, the price drop may well have pushed the PS3 back into the lose-money-on-each-one category. And that was the bright point. PSP unit sales were down by 20 percent, while the company sold nearly a quarter fewer PS2 units. The last shows just how inept Sony management has become. Back in April of this year, the company dropped the price on the PS2 by $30 in North America because it noted that 80 percent of PS3 users had owned a PS2 and, presumably, it wanted to seed the market with potential new PS3 sales. At the time, the numbers showed that the move was simply dumb, as dropping PS3 prices then would have done far more good.

The problems at Sony go way beyond gaming. The company didn't say exactly how big a loss it had in VAIO sales, only noting that both unit prices and total units sold were down. The division's $654 million loss was roughly 45 percent bigger than the loss in the same quarter last year. Given how long the products have been out, the only term that applies is disaster.

On a bigger scale, Sony rises to the level of fiasco -- not because it lost business in every single division, but because it keeps doing so, and the division profits it makes are completely outweighed by the losses. Even where it makes money, it makes so little that you'd have to wonder if someone with no background in operational management could do better. For example, the consumer products & devices group, which makes such products as televisions and digital cameras, had a 36.5 percent drop in revenue and an 86.7 percent drop in profit. On roughly $8.9 billion in sales (down by almost 20 percent from the previous year), operating income was ... $99 million. That's 1.1 percent, which is pathetic.

B2B & disc manufacturing, which makes pro video and audio equipment, among others, had a loss of $27 million on sales of $1.4 billion. Sony Pictures? A 30.4 percent drop in revenue for a loss of $71 million on sales of $1.5 billion.

There were only two bright spots. The music division saw a revenue increase of almost 150 percent, but that was only a benefit of accounting as Sony incorporated large parts of the operation as a wholly owned subsidiary beginning last October. And financial services doubled, with operating income of $364 million on revenue of $2.2 billion. So all Sony needs to do to get really healthy is to get rid of all product sales and just offer financing.

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