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Sony Bets Its Future On PlayStation II Console?
max_cool writes "Sony has announced that it is splitting its stock in preparation for a strong PS2 release. This could make many people very wealthy or destroy the company. Daily Radar has a full report on Sony's strategy and why they think it will succeed."
I'm no financial Genius or anything, BUT...Usually a stock split helps companies even if they're not about to release a new product. Stock splits (as i understand) split the stocks (duh) so that more people can buy in. I think that this is a marketing ploy by sony to make more money (damn capitalist pigs).
-Tim
I don't understand why anyone would possibly think that this is a risky manuver other than because Sony told them it was. Stocks split all the time. Sony is currently weighing in at 270. Stocks constantly split as they approach the 300 range. This is an awesome marketing ploy if they can convince everyone that they are willing to bet the entire company on this new system. In reality however, if the PS2 flops, stock split or not, sony is still going to be in business. They are far too diversified to let one product destroy them.
If the PS2 is a runaway hit, the company will be in its best shape ever. If not...well, Sony's hoping they won't have to deal with that alternative.
If not...then Sony better have one HELL of a backup strategy. The article is saying "Sony is hoping this stock split will be a success." HOPING? What kind of business practice is THAT? Sure, it's good business to take risks, but what if your risk turns into a Bad Move? Are you going to say "Oops" and pull the white sheet over the company's head? Not smart. Sony needs something to be able to recoup it's losses in the event of the PSX-2 being a flop.
Sony, if I may make a suggestion.....Sell off your AIBO dogs at Cost + 20%. That way, you still make a decent profit, and we get AIBO dogs cheap.
(P.S.: Yeah, this looks like a huge move on Sony's part, but there are MANY divisions to that company. If the PSX-2 fails, it will hurt them badly, but it won't kill them.)
-- Give him Head? Be a Beacon?
-- Give him Head? Be a Beacon? :P)
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It's a gutsy move if there ever was one, but the timing is pretty good, not to say perfect. Just take a look at the competitors. Both the X-box and the Nintendo Dolphin are falling behind and won't be out until who knows when. There's a lot of money to be made if they put themselves on the market at the right time.
However, they might meet some resistance from the Dreamcast. If that happens and the resitance is enough to shake Sony up a bit, then they are in
dangerous waters with everything riding on a single product. This will be exiting to watch.
- JoJo
From the article:
.18 micron technology is hard to produce, and I've heard reports that Sony is having a hard time churning out enough chips. Tack on the fact that this thing will either be very expensive ($400+) or a HUGE money loser for Sony (which they will then hope to make up for with software profits) and it becomes a very sticky situation either way.
The Stock Market is Strong. After a market slump in the Far East, the time is right for a move like this. In the US and worldwide, tech stocks are generally moving upwards.
Well, they were until today. While you can't base a trend on one or two days, there is legitimate fear (at least in the US) that the Feds will raise intrest rates, and that is affecting the stock market, and we can see that right now, with the NASDAQ falling like crazy today.
Secondly, to know the future we must know history. No market leader in any game console generation has been able to take market lead in the following generation. Playstation 1 leads the current generation, can it lead the next as well? History is not on Sony's side.
Thirdly, price. The
Lastly, programming. Even if the thing sells like hotcakes, you need good games, and word on the street is that this thing is a bitch to program for. Final dev kits aren't even available to most developers, and those that have them site a steep learning curve for programming for multiple processors and the small amount of video memory present on the system. This could hinder game development by the smaller companies out there.
Don't get me wrong, I'm all for PSX2 to succeed, as I think it's a phenominal piece of machinery, but for it to do so, Sony definitly has their work cut out for them.
Face it. Sony is a company with many feet to stand on, and have been on the leading edge of consumer electronics since I-can't-remember-when. Does anybody think they would risk going totally overboard over just one of several hundredproducts.
This makes me think that Sony also has something else, real big, up their sleeve that the general public is not aware of yet. What that could be? No idea whatsoever.
The PS2, being the dvd-player, game console, webtop box reinvented into one box will for sure have it's impact, but cannot possibly alone be responsible for this move
Just my $.02http://virtuelvis.com/
It's obvious to me that Roblimo has a zero percent understanding of the stockmarket. The reason a stock splits is to lower the price of the stock so that people can afford to buy more shares. This happens approximately EVERY DAY in the stock market. Yahoo! has split about fifty times. Splitting a stock just drives up the price of a stock again by making it more attractive to low budget investors. It's not risky at all, and it certainly can't destroy a company. Notice how the article didn't explain how a split could possibly be risky! It basically raved about Sony. Sony is just making it easier to buy shares, and the hype is giving the split a lot of attention.
I guess Roblimo must've bought into Sony hyper hook, line, and sinker.
No comment at this time
$270 per share is generally considered "high", so the stock is split. Theoretically a split has no effect on the company's value (2*135 == 1*270); in practice this tactic increases the volume of trading and usually creates the illusion of increased value.
Drinking will help us plan!
I've gotta think this is no problem. As I hear it, dreamcast isn't doing that great, nintendo 64 sales have basically stopped, and the playstation 2 has some very nice features. It uses DVD disks, but can play older playstation 1 cd's, is internet ready, and can play DVD movies too. All this, plus a huge number of games for playstation 1 that will almost certainly be improved for playstation 2, and I think you've got a hit on your hands. What I want to know is why will the Japanese get their version in March and the US won't until September or so?
Personally its not God I dislike, its his fan club I cant stand (bash.org)
Considering sony's current position, and the continued success of an out-dated system (the PSX being dwarfed in the technology sector by dreamcast and nintendo), it is a very intelligent bet that sony is making. When you consider that the PSX continually fills (on average) half of the ten titles on the weeks best selling list. Add this to best selling developers like Square, amazing sales and a loyal fan base, it doesn't take genious to see that the PSX 2 will sell. It may not sell as well as the PSX, but it will sell. And *if* Sony is able to interest even more top developers (ie: if it could grab RARE away from nintendo), the PSX 2 will sell big.
Finally, Sony has another thing going for it -- nintendo's mistakes. For all of my life i have been a nintendo loyal (owning every system, save the virtual-boy that they have made). As you might expect i purchased the N64 when it first came out and was sadly dissapointed: one controller, no games, no memory packs; this wasn't the Nintendo i grew up with.
Don't get me wrong, the 64 has great games...just not enough of them. The 64 has been, for me, enough of a dissapointment to cause me to consider switching to the PSX 2 when it comes out (having not seen a single *good* rpg on the 64 -- Zelda was good, but still -- it simply isn't enough)!
I can say, finances affording, i plan to buy sony stock.
Splitting the stock isn't really such a big deal with the value in the high 200's, but I would certainly seriously consider buying in to Sony at the moment. Don't be fooled for a moment in to thinking that the Playstation 2 could bring down the entire Sony Corporation, but I do appreciate it will play a significant factor in their stock value of the next year or so.
:-) Oh, and get my broker to book me some Sony stock
Many consoles seem to have come and gone from the old Atari's to the Dreamcast, but Sony seem to have managed to convince enough people that Games Console = Playstation. You only have to take a look at the shops just before Christmas where the original Playstation was outselling even the Dreamcast in the UK!! Sony have got the best market position in this area at the moment, mostly because the Playstation Brand is recognized, even (and particularly) by non-gamers.
With the market profile the Playstations has at the moment, I believe many people will subconciously wander in to the "Buy Sony" ethos, in much the same way your average boss used to think "Buy IBM" or your end user "Buy the latest version of Windows". Sure, PS2 is going to appeal to the serious hardcore gamer, but it's going to be instantly recognizable to the occasional user, and the buy,play,forget market who are undoubtedly going to represent the vast majority of sales.
As for me, should be perfect timing - I'll have just about completed all 4 Tombraiders on my trusted old Playstation just in time to upgrade it
I wouldn't join any club that would have me as a member
Philosopher (n) - a wise person who is calm and rational; someone who lives a life of reason with equanimity
Regardless of the article's view of Sony's stock split as a 'risk,' it's gonna be interesting to see whether PS2 sees the success Sony is hoping for. Despite the fact it's laden with features, the thing is expensive. And while backward compatibility is a good thing, there's always that risk of people being content with what they already have. Will the kid who got Playstation this Christmas be ready to move on so soon? More appropriately, will his parents?)
:)
I envision a slow start at best, although I intend to pick up mine first chance I get.
-hal-
Stocks are split when they get too expensive, so that smaller players can buy in more easily
At $270 it costs $27,000 to buy a hundred shares - the "round lot" quantum on the markets, below which you are typically penalized with higher transaction fees. Splitting, say, 3-for-1 brings the stock price down to 90 and the ante down to $9,000. Many more players can buy in. Typically they do, and bid the price up a bit, which is why stocks typically climb just after a split. (And larger players take advantage of that by buying on news that the stock is going to split - which also bids the stock up a little before the split.)
$270 is way high, so a split is overdue. The split will almost certainly result in the stock going up. If the marketing droids can convince some fools that there is some risk to this and doing it is "daring", said fools will interpret the rise as a success for Sony.
As for any real risk from the move, the only one I can see is a psychological hit if the stock ends up trading at a very low number. But if they don't split it beyond 3-for-1 they'd have to lose half their value after the split to drop below even 45. If the stock value drops by 50% they have some other problem - big time.
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
Historically, the makers of game consoles lose a lot of money at first as the hardware is often more expensive then they charge for it. Console companies usually make their money in the following years selling games.
The PlayStation 2 is theoretically more powerful than the SGI workstations that created the original Toy Story! The custom chip in the console costs about $260 alone, and the console is expected to retail at $300 or so. They would likely have to sell it for $400 or even $500 to break even! So, it seems a bit weird that they would risk everything when they know that they were going to lose money. Or am I stupid and wrong?
David
When you choke a smurf what color does it turn?
It's alive and thinking
:)
Finkployd
A stock split is not done in anticipation of a product launch. A stock split is done for the reason of inviting more investment capital into the fray of the company. (It's entirely Sony's decision what to put in their press release - but they should not entirely assume that their stock price will gain due to a product that could possibly not have the rosy release they predict)
For instance, let's say a company's stock costs $500 USD. So, I'd have to pay $500 to get one share of the company.
Now scratch that and say that the company split the stock at $500 with a 2 for 1 split. The stock halves, and everyone gets twice their shares. Now let's say I buy the stock - two shares at $250 a share. It was easier for me to buy the latter way rather than the former way because I had more options as to how much I want to invest in this company.
The point is that you can't buy 1/2 of a share of a company. A split makes it easier for people to invest in a company.
Now, on to my second point. Sony announced that it would center its business around the Playstation long ago - July, 1999. The idea is that with the huge boom that Playstation experienced, Sony realized that there is a market in "set-top boxes." However, the set-top boxes have to do more than surf the web - they have to be able to entertain and be usable by all types of people.
Hence, Sony actually restructured the company to be centered around the idea that the future's money will be made through connectivity. Sony appliances will be able to talk to each other, and be easier to use. Imagine just hitting the "web" button on a Playstation console and your TV automatically switches to the proper mode, video resolution, etc.
That's what Sony is talking about and they've already made numerous claims as to making Playstation the console that everyone will use.
You should never take life too seriously - You'll never get out of it alive.
Okay... lemme break it down this way...
You buy 1 share of RHAT at $100 a share
if it goes up 1 point it goes up %1
you make $1
now lets say that RHAT splits, now you have 2 shares at $50
if it goes up 1 point it goes up %2
You make $2
The PSX2 is not only a console, it is a DVD player. I'd pay $400 for a high quality console and a sony DVD player built into one.
After going through some research, I would personally not buy any Sony stock. The price has jumped a tremendous amount over the last year from 65 to a high of nearly 300 and is currently near that high. Granted, some consumer electronic stocks has gone nuts, but Sony's sales and income growth were miserable this last year. The price to earnings ratio of 90 puts it up there with some of the more wacked internet stocks. The stock split is definately an attempt to gain more capital, not unreasonable.
I did find out that Playstation by itself accounted for about 10% of Sony's income. That's pretty damn impressive. And Sony is betting the farm on PS2 to succeed. The next hurdle is seeing what happens in March 2000, when it's released in Japan.
Is Sony stock worth the money? Probably not. I can find other companies to invest money into with better, more solid future returns. Just my opinion. Please don't pelt me with stones if Sony stock goes crazy this next year.
-S. Louie
"I may be Love's bitch, but at least I'm man enough to admit it."
As to your question about the PSII being 128-bit, that depends on what part you are looking at. If you look at the bus to video memory its 2,560 bits wide. Internaly the system runs a 128-bit databus at 150 MHz though. The superscalar core runs at twice that speed (300 MHz) and its got gobs and gobs of other computational units. Everything from a MPEG macro-block decoder to multiple vector units (Think SIMD, that is G4, MMX, KNI...) This information comes from Microprocessor Report, April 19, 1999.
CPU Core: MIPS III, MIPS IV subset + 128b SIMD
two 64-bit integer units and an FPU.
16K of scratch RAM, this is cool because its basicaly cache that you get to hand optimize.
The real power shows up in the Vector units Unit 0 has 4 FMAC's (Floating point multiply accumulate, a += b * c), and one Divider. The second Vector unit has 5 FMACS and 2 Dividers.
And of course everyone loves the 3.2 GBytes/second main memory bandwidth, and the 48 GBytes/second video memory bandwidth (remember those 2,560 bits of video memory data bus).
There are plenty more fun facts to be had, but I have gone way past your question...
One of the main PR points that I have seen for the PS2 is that it will be backwards compatable with the original PSX. I don't know about Nitendo but I remember that Sega's Megadrive System (I believe in the US it was called Genisus) had the ability through a special adapter cartridge of playing all the previous Master System games. AFAIK these adapters were a flop.
For the launch of the PS2 most developers are not going to release PS2 versions of their new games, focusing on the PSX standard so as to capture both markets. This reminds me almost of the Commodore C=64 and C=128D (Remember these things before the Amigas). Consumers thought why buy the 128 when everything is written for the 64?
Will the new PS suffer the same fate?
The MyTh - I am a figment of the Imagination - [Im Probably even not here]
This is a pointless article by someone who doesn't have a clue about the market. Example:
There are 500 shares of sony stock @ $10.
If the stock splits then there are 1000 shares @ $5.
Either way, there is $5000 worth of sony stock in the market. If the first goes up by $2 to $12, then the second would go up to $6 - same percentage change - that's all the market cares about.
Obviously, this guy has never heard of market capitalization... (the total value of all the stock (not all stocks, just all the stock of a company) in the market at market price)
On a less mathematical level, but more relevant to reality:
Announcing a stock split usually indicates that a company expects large growth in the future - often people buy into stocks that split for this reason. (Please note that I do not own any sony stock, nor do I intend to purchase any in the near future) But announcing a split and not going anywhere is equally possible, if only to allow people to buy smaller amounts of your stock - if minimum purchase is 100 shares and the stock is at $300, a split might be wise to help out small investors.
Cyano
Don't like my sig? I don't either.
There's so much wrong with this article it's hard to know where to start:
This financial maneuver is a risky move that's generally taken by companies with massive upward momentum such as Yahoo.com, Amazon.com and, more recently, Qualcomm. A stock split is a responsible move which almost every successful publicially traded company makes. It is practically mandatory for a company with rising stock prices. The only exception would be Berkshires Hathaway, which has never split and now costs over $50,000 for a single share of stock. As Sony jumps into this stock split, its financial momentum is not as strong as the others, While I haven't looked over any filings for Sony, Yahoo, Amazon or Qualcomm, I can guarantee you that Sony has better "financial momentum" than all of those companies put together. They might have bright future prospects and stock price momentum, but Sony is a proven, succesfull, profitable, diversified company unlike the others. Perhaps the most important reason that Sony has chosen to split its stock is that it has little alternative. Well sure, it has to split, but that has nothing to do with a product launch. The stock is simply too expensive. The rest of the article talks about why the PlayStation 2 will be successful, but that's not really relevant to the issue of a stock split. I'm not familiar with Daily Radar, but they should stick to stuff they understand or learn a little about equity markets before posting garbage like this.
The Math Maestro Tutoring Services in Seattle
The PS2 looks like a good product to me, however I wonder if it will foster a whole new breed of ignorant users who will find their way to Usenet. (Actually my news server hasn't given me any new messages for a week, so I can't complain right now!)
It seems that every time we get accustomed to a new lowest common denominator on the Internet, we manage to have a "improved" one.
I think that the online PS2 community will be the largest community of wannabe hackers, warez fiends and crossposters ever. The PS2 is designed to appeal to an age group which is rapidly losing its ability to communicate intelligently or have a attention span longer than 30 seconds.
The spec's looked great at the game developers con 1999. The demo platform was looking good at E3 99. (they were using laptops with RH to monitor and reset the development platforms on the show floor.)
(FYI - word was that they didn't have enough physicists and programmers to fully take advantage of the specs sony published...I wonder how close the end PS II will be to the first published specs)
I wonder if they are still charging royalties per each GAME made. (normally console makers sell the cousoles near cost (maybe even a loss?) and make it up on the royalties. (est $8-9 USD per CD, or $23-25 USD per N64 Cartridge.) hmmm - how would they handle royalties on a Java VM CD? (assuming you could then download play tons of non-graphic intensive java games without paying additional royalties.)
Let's say, strategy-game style, that there are four resources you want a game system to have:
Dreamcast
PlayStation2
Result: Good start for Sony. Dreamcast holds firm.
Now let's skip forward a year to Christmas 2001 and include Nintendo's next system (ignoring any Microsoft entry):
Dreamcast
PlayStation2
Dolphin
Result: Wild-and-crazy three-way brawl. The Dolphin has a debut that takes the luster off of the PS2. The PS2 establishes itself. Dreamcast could end up either on top or on the bottom based on how well Sega puts together its software portfolio in this time.
Anyone else out there want to venture their guess?
Enjoy the irony! And please note that many Slashdot readers have debunked that hype for those who *don't* know that a stock split is a ho-hum financial maneuver for companies whose share prices have put round lots (100 shares) out of reach of the very small-time investors who are most susceptible to hype.
More and more, before posting a story like the one above, instead of adding my own words to it I find myself thinking, "Fifty others will say exactly what I would anyway, so why not let them?"
Slashdot has some amazingly bright readers. The debunking always gets done, one way or another, whether by me or by you.
- Robin
PS - remember the Jesux "Christian Linux" hoax that took in ZDNet and Wired a while back, but got exposed here? I had a pleasant IRC conversation with Pudge, the perpetrator, earlier today. Real nice guy.
(I'm often on #slashdot at irc.slashnet.org if you want to continue this discussion, BTW.)
Upgrades don't always work either. Take a look at the failed Sega 32X add-on for the Genesis. That tanked rather quickly. Also, the Game Boy Color is backwards compatable, there are games that take advantage of the new features while still being able to be played on the old, and there are an increasing amount of games that are GBC only. Nintendo plans on keeping the backwards comapatability going in the next-gen GB as well. If handled properly, b/c can be very useful. I think I'm gonna wait for the Dolphin, though. I've heard of few problems with that, whereas the emotion engin in PSXII is glitchy, or so I've heard. But that's just my opinion, I could be wrong.
Mess not in the affairs of dragons, for you are crunchy and good with ketchup.
If your statement that Sony gets a $7 license fee per PlayStation cartridge is true, that's a huge royalty when measured against the retail price of each cartridge. It's even more astounding when measured against the wholesale price of the units, which is the only money that the cartridge developer ever sees.
One question I have about the assertion that Nintendo was a $5 billion company before Pokemon: $5 billion in what, sales or market capitalization? Perhaps they had $5 billion in annual sales. But, according to Marketwatch, Nint endo's market capitalization (another name for the total market value of the company) is only $2.9 billion.
I'd like to own a company that's worth that much, but it's tiny compared to Sony's market cap of over $110 billion.
--
Dave Aiello
-- Dave Aiello
PS2 is close to 'bet the company'
Let me begin by pointing you to the Fundam entals page for Sony on CBS Marketwatch. Sony is currently valued by the market at around $110 billion -- this is the market capitalization. There are, according to this page, 411 million shares outstanding. Over the last 200 trading days, an average of 205,100 shares have been traded each day, or 4/100ths of 1 percent of the shares.
I compared this stock to General Electric, which is another extremely large, established company. In spite of the fact that General Electric is worth about 4 times as much as Sony (comparing market caps), 3 times as many shares in GE as a percentage of its total number of shares outstanding trade each day.
This means that GE is much more liquid (easy to trade) than Sony. That is potentially a good reason to split Sony stock, because the easier it is to buy or sell a stock, the less wildly the price tends to swing. Liquidity is considered a good thing by institutional investors and people who trade stocks for a living. By contrast, lack of liquidity is the reason that Internet companies move up and down fairly violently on a daily basis.
The reason that some stock market newcomers think stock splits are indicators that the company is moving boldly is that recently, many companies that have announced splits have seen their stock prices soar immediately afterward. This initially happened with Internet-related companies like Amazo n.com, but it has gotten really out of hand lately, with companies like Qualc omm.
Stock splits are really market neutral events. If a stock is at 100 the day before the split, and it splits 2-for-1, it's value at the open should be 50. I say "should be" because a stock often does not open at exactly the same price as it closes, so if there is a 2-for-1 split, the stock should open at around half the price of the close the previous day.
This brings us to another fallacy in the article. It says that a stock split is a "financial maneuver that is a risky move". The stock that traded for 100 per share yesterday was not issued by the company yesterday -- it was issued at some time in the past. The trade at 100 that took place yesterday was between two participants in the stock market who (probably) had no relationship to the company.
So, when the stock opens at 50 on the next day, after splitting two for one, not only did the people who traded the stock not lose anything (since they automatically have 2x the number of shares), but the company did not lose anything since they did not own the stock that was traded yesterday. Of course, any stock that the company is holding on its balance sheet (generally called treasury shares) did not increase or decrease in value, since the number of shares doubled while the price was cut in half.
I could go on with this analysis all night, but let me jump to the end of the Daily Radar article. The author makes the statement:
All I can say about this is that he must mean that the company is building its entire video game console product line around PlayStation2. Sony does a lot more than produce game consoles. In addition to its video game console business, it owns 11 different recording labels, a TV and movie production business which produces such insignificant products as the TV series Dawson's Creek, and Sony Electronics which makes everything from chips to Jumbotrons.
That's why the company is worth over $110 billion, and that's just a few reasons why this article is so humorous to people who enjoy analyzing businesses and buying small pieces of them.
--
Dave Aiello
-- Dave Aiello
I think this is just shirking editorial responsibility. Granted, slashdot is unique in that it is an interactive forum, but that is not sufficient reason to drop all editorial control. A few readers may correct it, but many posts with equally high scores frequently purport otherwise. Whom is the naive person to believe? If slashdot says so, it must be true, right?!?! This is not to say that every post must be edited, but those on the primary page should be, as they reasonably appear to fall under the review of the editors. If you're going to exercise no control over it, then atleast make it abundantly clear (to the average reader) and do it evenly (more than to just things that you don't oppose).
Roblimo, if I understand what you're saying, you understood that this piece was stupid and wrong when you posted it, but you posted it anyway, possibly in the hope of stirring up controversy?
It seems to me that Slashdot quite frequently posts articles with a controversy-inducing spin. The Gnome Napster article was one such case where I was involved. The hydrino one was another. "Crank or earth-shattering science?" How about just another scam artist who is good at exploiting people's desire to believe.
I've noticed that wrong and stupid posts often get a lot more response than well-written, balanced ones. In the former case, people have a great urge to write in and correct the original post. Some of these corrections are sensible, but by Sturgeon's Law, most are themselves pretty bogus. Presto! Instant controversy. After a well written article, people tend to be content.
So I think there is a danger that interesting and important stories are getting lost in the noise. I like the volume and rough-and-tumble nature of slashdot, but I for one would prefer a forum in which accuracy and footwork counted for something.
ObOnTopic: anyone know the status of the Linux port to the PlayStation II?
LILO boot: linux init=/usr/bin/emacs
I can see online gaming on the Dreamcast really taking off. (1) It'll take the pain out of getting online -- no more downloading Gamespy, searching for a server that's not too many hops away, patching your game up 'til it works etc etc.
(2) Consoles will attract some more "fun" games. I'm personally a keen console gamer, and I'd far rather play something like Chu Chu Rocket online than an over-serious Quake clone. The chance to take part in a worldwide Bomberman league -- now that would be terrific.
--