I doubt many would argue when I say it's been a tough year for Sony (NYSE:SNE). The quality control of some of its products -- and the progress of its turnaround -- were under scrutiny as the electronics giant dealt with things like its massive battery recall, which affected laptops from companies such as Apple (NASDAQ:AAPL), Dell (NASDAQ:DELL), Hewlett-Packard (NYSE:HPQ) ... well, just about everybody, even Sony's own laptops.
In January 2006, Sony started the calendar year off with a bang with its fiscal third-quarter results. (Its shares jumped 18% that day -- one could argue that that was one of the high points of optimism for Sony in 2006.) Sales increased 10.2% to $2.37 trillion yen (or $20.06 billion). Its operating income increased 46.8% to 202.8 billion yen, or $1.72 billion. Net income increased 17.5% to 168.9 billion yen, or $1.43 billion. If you recall, of course, investors were looking forward to a Sony turnaround with Howard Stringer at the helm.
In the fiscal fourth quarter, Sony's sales increased 8.7% to 1.85 trillion yen (or $15.77 billion). However, it reported an operating loss of 62.2 billion yen, or $532 million, a narrower operating loss than the same quarter of the previous year. A change in tax rates resulted in Sony reporting a wider loss than the year before, at 66.5 billion yen, or $569 million. Sony had some highlights, such as strong sales of PCs, LCD TVs, and strong results from its film and financial services divisions.
In the first quarter, my Foolish colleague Anders Bylund reported on Sony's progress on the turnaround. First-quarter net income came in at 32.3 billion yen -- $231 million, or $0.27 per share, with sales up 11.2% (1.74 trillion yen, or $15.17 billion). Anders noted a strong turnaround in Sony's electronics results, with TV revenues surging 77%.
The second quarter at Sony didn't bode quite so well, since this is when the battery recall burned the electronics giant. Earnings dropped 94.1% to $14 million, or $0.01 per share, on an 8.3% increase in sales to $15.71 billion. Its second-quarter operating loss of $177 million was affected by charges related to the recall.
Over the course of the year, Sony's growing pains have been more and more pronounced. That's why I couldn't help but make Sony my Halloween Trick this year -- too many problems and miscommunications seem to indicate quality control and communications issues within the company, and sometimes I wonder about incidents where it seems Sony has forgotten how to be customer-centric at all. (A recent fake blog controversy made me think Sony hasn't even learned lessons from its past mistakes, either.) Despite the fact that the PlayStation 3 is a hot product, I'm not entirely convinced that Sony's recent missteps haven't injured its brand and alienated many customers.
That's just me, though. Let's check in with the CAPS community and see if they think Sony's going to be a great stock for the long term.
|
Sony | |
|---|---|
| CAPS Rating | * (out of five stars) |
|
Total Bulls |
259 |
|
Total Bears |
198 |
|
Bull Ratio |
57% |
|
Bear Ratio |
43% |
Sony has a CAPS rating of just one star, with 57% of the players who have rated the stock believing it will outperform. Although that is a majority, I wouldn't call it a landslide victory, and there are plenty of bearish pitches to counterpoint the bullish ones in the database.
Here's what one of the Sony bulls, Hozer02, had to say of Sony in late November: "The 8 Thousand Pound Gorilla in the entertainment/electronics/media industry. Even with battery recalls, PS3 shortages, and the occasional movie bomb, this company is just too globally huge to ding."
It's true, Sony is a massive conglomerate with many moving parts, not least of which is the popular PlayStation 3. However, you might wonder how well the machine will do, with its high price tag, tardiness getting out of the gate, competition with Microsoft's (NASDAQ:MSFT) Xbox and Nintendo's Wii, and of course, the fact that Sony manufactures each PS3 machine at a sizable loss -- but hey, I am, after all, a Sony bear.
At any rate, there will be many interesting moving parts to watch at Sony as 2007 unfolds, not least of which is the success of the PS3. I'm certain Sony shareholders are hoping for a better year than 2006, when there were ample issues for the massive company to deal with.
More Sony than you can shake a stick at:
Check out the other companies featured in "The Motley Fool's 2006 in Review and 2007 Preview" special.
Dell is a Motley Fool Stock Advisor recommendation and an Inside Value selection. Microsoft is a Motley Fool Inside Value pick.
Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.
