Home Gaming Sony rejects proposal to split its entertainment business

Sony rejects proposal to split its entertainment business

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ThrowAwayAllTheMoney

It’s no secret that Sony isn’t doing so well financially and in a recent board meeting a proposal was put forward to split off the powerful entertainment division.

The idea is quite simple really; take your huge and bloated division, spin it off into a new company and then trim the fat to increase profits. Or in other words: be American and squeeze it for everything it has before discarding it like yesterdays toilet paper.

However in a country as steadfast as Japan the idea of splitting companies to maximise profits doesn’t sit very well and I personally am quite glad they decided against the idea. However I do think Sony needs to re-look at their electronics division and pay special attention to stop it destroying their bottom line.

Unfortunately the world’s investors didn’t take kindly to the decision and Sony’s share price has plummeted after hours trading dropping 4.5%

But it’s not all doom and gloom,  as the stock has increased 100% so far this year alone and Sony may well be on the path to revival.

Last Updated: August 7, 2013

19 Comments

  1. Pieter Kruger

    August 7, 2013 at 10:45

    Although this initially causes an almost 5% drop in share price I think it’s the right decision! Sony electronics is in deep doodoo but the software is doing relatively well! Should they split the 2 I doubt it if Sony electronics would survive at all! Sony electronics now needs a 180 when it comes to plunging money into unsuccessful concepts like the “smart watch” and dare I say it the Vita! Simplify, cut costs (maybe sell a few more buildings etc. ????) and give the company time to recover completely riding on the revenue it will undoubtedly receive from PS4 sales! Stupid business decisions got them where they are now (dropping the eye to undercut MS might still come back to bite them given the R&D that must’ve gone into designing/manufacturing it). They will have to tighten the belt, and I foresee a big clamp down on “free” services and goodies from Sony! In the end they must survive if only to ensure good competition so all the best to them!

    Reply

    • Spathi

      August 7, 2013 at 10:48

      I don’t agree with everything you’ve stated, but well said.

      Reply

    • DarthofZA

      August 7, 2013 at 10:55

      The PS3 sales didn’t bring money into Sony’s hands, so presuming the sales of the PS4 would isn’t a logical step to make.

      Reply

      • Spathi

        August 7, 2013 at 10:55

        Inside info?

        Reply

        • DarthofZA

          August 7, 2013 at 11:10

          The PS3 was still losing money annually until last year. Just look at the history of the financials.

          Reply

          • Spathi

            August 7, 2013 at 11:26

            But that doesn’t factor in any software sales? It is only the physical hardware, and even that does make a profit now?

            Also, the whole cell saga made it so unprofitable. The next gen I believe won’t be nearly as unprofitable, or at least that what I believe.

          • DarthofZA

            August 7, 2013 at 11:28

            It does now, but it didn’t for a very long time. And it did take it into consideration. On of the biggest topics in fanboy debates in the past had been that Sony doesn’t make money, but MS does. That has changed now.

            At one stage, the PS3 had lost more money than the PS2 had made…

          • Brian Murphy

            August 7, 2013 at 18:21

            No, the PS3 itself broke even in mid-late 2010, according to isuppli teardowns and manufacturing information. (As of Dec 2009, they were down to $37/unit loss on the 120g Slim, however production costs were expected to drop dramatically in 2010)

            Sony’s a much bigger company than just Sony Computer Entertainment however, and they’ve suffered financially due to the earthquake, and tanking Camera/TV divisions.

    • Verrayne

      August 7, 2013 at 13:48

      The selling of a building is one of the worst things a company can do. Since you depreciate the cost yearly and eventually sit with a great asset that gave you years of tax deductions. Then you sell it to pay rent which is not as tax friendly.

      I’ve been to the Sony building in New York a couple of times, to sell it is probably one of the worst things they did.

      Reply

    • Kromas

      August 7, 2013 at 16:26

      Soooooo …. Apple failed for years with their “Innovative products” and lost money. Then came the iPhone. Just saying.

      Edit: I don’t like Apple in case I am confused with a fan boy.

      Reply

      • Pieter Kruger

        August 7, 2013 at 17:27

        You saying they should keep trying? Maybe, but it’s a gamble, maybe wait toll the financials are more sound? Anyways, I think it was the iPod that gave Apple their breakthrough financially back in the days!

        Reply

        • Kromas

          August 7, 2013 at 17:43

          Actually the iPod did not even closely help them out till they opened their minds and released an updated windows version. Its pretty much the same reason Microsoft had to backtrack on “features” for their console. You have to innovate yet still keep the masses happy. No innovation is gonna cut it unless you appeal to the masses. I am not saying keep making watches, I am saying start working on projects that are less niche. Keeping in their current rut,they will only keep losing money. As for the eye … kinect is horrible and you can quote me on that. Sony made a massively smart move there. So in short: Stop making stupid expensive TVs that can not compete with the likes of samsung and stop making stupid inventions that are waaayy to niche. Focus on what people want and do not sell your electronics division cause if by some chance the console market falls apart you have something that can get you out of bankruptcy (if managed well.

          Reply

  2. TiMsTeR1033

    August 7, 2013 at 10:45

    I wonder how much of a loss they had on the ps3s alone in first 2 years.

    Reply

  3. Trevor Davies

    August 7, 2013 at 10:48

    I think this is good from Sony, it’s a long-term strategy about what’s good for the business & where they see it going. Investors rarely think long-term & are more concerned with short-term benefit for themselves. They need to do some serious work to stop hemorrhaging money though.

    Reply

  4. Spathi

    August 7, 2013 at 10:54

    Well done Sony. I won’t be as brave as some others to pretend that I have a clue what your strategy is or how your finances are currently looking, but well done for sticking with your guns. Kaz has made great decisions so far and Sony is looking much better since he has been in charge.

    Reply

    • Pieter Kruger

      August 7, 2013 at 10:59

      No need to pretend to know what their finances are looking like, they just recently released their Financials.

      Reply

      • Spathi

        August 7, 2013 at 10:59

        I know, but I didn’t read them. Did you?

        Reply

  5. Verrayne

    August 7, 2013 at 13:49

    The one thing I can say that is awesome is I bought sony shares at $15 a share for R8 a dollar. Now sitting at almost $21 a share and R10 a dollar.

    Couldn’t be happier with my big Japanese electronics giant.

    Reply

  6. HvR

    August 7, 2013 at 20:56

    I see there was some confusion in what subsidiaries of Sony does what and what the spin off would have entailled if it continued.

    Sony Corporation is the holding company of all the Sony subsidiaries AND also the electronics division that handles all semiconductor products and electronics products EXCEPT the Playstations (PS3, PS4 and Vita) and mobile phones.

    Sony Computer Entertainment (SCE) handles everything Playstation, R&D, hardware, games development and publishing.

    Sony Mobile Communications handles everything everything related to their mobile phones.

    Sony Music Entertainment is the Sony record label.
    Sony Picture Entertainment handles movies and television.
    Sony Music Publishing, largest music publishing company in the world owned by Sony and Micheal Jackson (well now in his estate).

    And then Sony Finance and a bunch of smaller co-owned subsidiaries.

    The proposed (by one investor Third Point) spin-off was for Sony Picture Entertainment specifically and Sony Music Entertainment as secondary possibility; SCE (the Playstation business) was never part of the proposed spin-off. People got confused by Third Point’s and or the media’s definition of “Entertainment Division(s)” thinking it included all subsidiaries with entertainment in the name.

    Reply

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