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Bond and PlayStation 3
can't save Sony
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CNNMoney.Com
Bond and PlayStation 3 can't save Sony
Despite a $40 million opening for 'Casino Royale' and
long lines for the PS3, Wall Street is still wary of Sony's
stock.
By Paul R. La Monica, CNNMoney.com editor at large
November 20 2006: 2:02 PM EST
NEW YORK (CNNMoney.com) -- It was a reasonably
good weekend for Sony at the shopping malls and
multiplexes...but Wall Street didn't see it that way.
Boxes of the company's new PlayStation 3 game
consoles flew off the shelves.
"Casino Royale" had an impressive debut...but 007 came
in second at the box office to a film about dancing and
singing penguins.
Sony's PlayStation 3 quickly sold out at stores this
weekend...but is it due to strong demand or a relatively
small supply?
Shares of Sony are still up since Howard Stringer took
over as CEO in June 2005. But the stock has taken a
beating in recent months.
And the Sony-produced "Casino Royale," the latest in
the James Bond movie franchise, grossed $40.6 million
at the box office in the U.S.
Yet shares of Sony (Charts) fell more than 1 percent in
trading on the New York Stock Exchange Monday,
extending its recent losing streak. Since Sony's stock hit
a 52-week high in April, shares have slid nearly 25
percent.
Despite the stock's latest struggles, it's still been a
fairly strong year and a half for Sir Howard Stringer,
who took over as Sony's chief executive officer in June
2005.
Under Stringer, Sony's first non-Japanese CEO, Sony's
stock has gained about 15 percent, largely due to hopes
of higher profits fueled by cost-cutting.
PS3 debut leads to violence
But investors may be starting to lose some patience
with Sony as the stock continues to slide in what has
been a good market environment for other electronics
makers and media companies.
Shares of Dutch consumer electronics company Philips
Electronics (Charts) are trading near a 52-week high, as
are media firms Walt Disney (Charts) and News Corp
(Charts).
Sony has been hit by concerns about shortages of the
PS3 (only 400,000 consoles were available in the U.S.
due to manufacturing problems) as well as a massive
recall of batteries used in laptops from Dell (Charts),
Apple (Charts) and other PC makers.
Evan Wilson, an analyst with Pacific Crest Securities,
said that he doesn't think this past weekend's news will
help Sony all that much.
Wilson argues that the main reason the PS3 sold out
was simply because there weren't that many available.
"The launch of the PS3 was dictated by supply, not by
demand. The fact that it sold out isn't really significant
news. I continue to think that overall, Sony has a
difficult row to hoe," he said.
To that end, Sony will face a tough challenge from
another new game console that just came out,
Nintendo's Wii.
"The Wii is giving them stiff competition. As we go into
2007, we'll get a better picture for demand for the PS3,"
said Martin Kariithi, an analyst with Technology
Business Research, an independent research firm based
in Hampton, New Hampshire.
There also have been reports of glitches which make it
difficult for the PS3 to play some older games that were
originally made for the PS2.
And even though Sony has had a solid year at the box
office - the company's movie studio currently has the
market share lead in U.S. ticket sales - that might not be
enough to help the company's financial results.
Blond, James Blond
Sony's pictures division, which produces television
shows as well as movies, reported an operating loss for
the first two quarters of the current fiscal year. And the
business only accounts for about 11 percent of Sony's
overall sales.
What's more, there may be some disappointment about
the widely-hyped Bond, which featured a new actor,
Daniel Craig, replacing the popular Pierce Brosnan.
Although "Casino Royale" had the second best opening
weekend of any Bond flick, it failed to do better than the
Bond movie that immediately preceded it: 2002's "Die
Another Day."
That movie, the last 007 film featuring Brosnan, debuted
with a $47 million take and went on to gross $160.9
million in the U.S., making it the biggest Bond hit of all
time at the box office, according to figures from Box
Office Mojo, a movie industry research firm.
In addition, "Casino Royale" actually finished second at
the box office this weekend. The computer-generated
animated film "Happy Feet" narrowly beat out Bond
with $42.2 million in ticket sales.
"Happy Feet" was released by Warner Bros., which like
CNNMoney.com, is owned by Time Warner.
Nonetheless, Kariithi said he expects Sony's film and
television business to generate a profit during its fiscal
third quarter, which ends in December, thanks to strong
worldwide ticket sales for "Casino Royale" as well as
solid box office returns from "Open Season," a CG
animated movie that came out in late September.
But even if PS3 sales pick up and the movie business
continues to do well, Kariithi said Sony's fate lies with
its consumer electronics business. If Sony sells a lot of
LCD television sets, camcorders and digital cameras
during the holidays, then that, more than big numbers
from James Bond, will boost the stock.
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