Sony`s losses could triple

I remember the first time I bought my first Walkman. A Sony walkman. What a product. A cassette with my favorite music on, right in my Walkman, driven by batteries. It was launched for the first time in 1979. The worlds first portable music player with a compact cassette format.


Sony has historically been notable for creating its own in-house standards for new recording and storage technologies, instead of adopting those of other manufacturer’s and standard bodies. They introduced the MiniDisc format in 1992. Sony`s Network Walkman line of digital portable music players did not support the MP3 de facto standard natively. Among many other big things, they bought CBS and have released lots of music, but now things have changed.

Sony (SNE) traded down -6,77% yesterday, and this is probably the beginning. First of all; Sony have decided not to pay a dividend for the first time since listing in 1958. They have no announcement regarding restructuring announcement either.

Investors can expect more bad news in the future. Sony cut its FY3 guidance factoring in the 180b impairment in goodwill associated with Sony Mobile. Sony`s lack of additional clarity on the ongoing strategy and the restructuring of the smart phone business is a big surprise.

But the biggest surprice is their cut in the dividende to zero for the first time since 1958. That`s what drove the shares down yesterday -6,77%. Investors are disappointed at the lack of dividend, but on the other hand; Sony could save about 25b Yen per year and that could be used to restructuring and investments.

It`s early to forecast Xperia Z3`s success and Sony need to rely on Sprint that is disrupting the U.S wireless market via aggressive data pricing. Consumers need to find value at a package that includes Sprint`s low-cost shared data plan.

Sony has managed to sell 3,5 million of the PlayStation 3 and 4 consoles, and if they do it all right with both, to the game and subscription business, they earn about $1 billion for the 2016 fiscal year.

Yesterday, Sony warned that they will report a much larger than expected loss of some 230 billion yen ($2,14 billion), and that`s nearly three times the loss to last year`s 50 billion yen. Sony is blaming ailing smart phone business for the revised guidance.

Last year, Sony`s mobile division was its most profitable, but sales have fallen as Sony`s competitors Huawei and Ziaomi have become dominant in the worlds largest smart phone market, China. In addition, they also compete with big brands like Apple and Samsung.

Sony`s president and chief executive Kazuo Hirai, said they will cut their work force by 15 percent, or about 1,000 workers. He also said that mobile business is one of their core business, and that they will continue to do business in this big market.

Net income has declined from $1,044 billion to -$1,340 billion and that is a dramatic 228% drop.

Sony`s movie division is not a big success either. Sequels of Robocop, 21 Jump Street, Think like a Man 2 and Spiderman underperformed. I would rather go for Walt Disney`s (DIS) Ice princesses and Guardians of the Galaxy.

Sony is now trading at $18,88, and it`s tumble isn`t done yet. Bad news like we saw yesterday will continue to bring down the stock and Sony demonstrated the ability to peel away -30% or more when the bearish mood really sets in.

I`m bearish on Sony and bullish on Walt Disney and Apple.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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