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Microsoft buyout of ailing Sony possible?

Posted: 2006-04-12 09:03pm
by Max
I say BS, but I'm just posting it for anyone that wants to read it.

http://www.bonafidereviews.com/article.php?id=148
"Like many of you, it’s hard for me to remember a time when the word "Playstation" was not synonymous with gaming. Sony has held the all mighty hardware throne for an astounding eleven years at the time of writing this. The same can be said for Nintendo’s 9 year reign with the NES and SNES from 1985 - 1994, and even more so with Atari’s 10 year reign ending with the collapse of the entire industry in 1981-1984. With that in mind, one must ask, is Sony placing to much faith in the Playstation moniker at this point or do they truly understand the business on such a level that the cat and mouse game they are playing with the PS3 and any information surrounding will ultimately pay off in the bolstering amount needed to save the ailing hardware giant.

In a recent interview through a European media outlet, Mr. Fornay Vice president of SCEE (Sony computer entertainment of Europe) made some rather astounding remarks regarding the PS3 price-point and the views being placed upon it. He hastily hinted that a Blu-ray player in the neighborhood of $599.99 would be an absolute steal, but as a stand alone gaming machine would be quite overpriced, as proven in the past. Sony was quick to issue a rebuttal on his behalf stating these were his personal views and not official commenting on the price of the PS3. Damage control at its finest. But keep in mind the massive cover up after Sony’s own CEO Howard Stringer hinted at the PS3's launch delay to Vanity Fair. Sony PR was quick to label it as "pure speculation" coming from the company’s own CEO, which was later to be proven completely accurate when the delay was made official mid-march of 2006. Sony isn’t one for honesty as a company entity however their head honcho's loose lips seem to deliver the only truth passing Sony’s door these days.

If the PS3 is delivered at $599.99 what does this mean for Sony? Historically gaming machines would have never sold for anything north of $299.99 (that was until the Xbox360 moved the line to 399.99 in winter of 2005). Just look at the complete failure of the 1990's powerhouse, the 3DO, at the relatively respectable price of $399.99 (roughly $449.99 inflation adjusted). With the PS3 now touting the largest price tag for any console in the history of gaming and higher then most mid-low end PC's at this point, does this spell disaster for the ailing hardware giant? Sony hasn’t posted net gains in the past three years until 2005 when they posted a depressing $580 million dollar profit after posting loss's in the billions for the last three fiscal years.

The true death blow at this point would really point to the HDCP compliance required for Blu-ray movie playback (as well as HD-DVD), making the PS3 no more then a video game system with a capacity of 50 gig games for anyone who purchased a HDTV in the past 6 years. So were does the PS3's $600.00 price tag come into play for us non-HDCP HDTV owners? The answer is nowhere.

PS3 production pricing at this point has been laid out to be anywhere from $850 - $956 per unit, meaning there will be a loss on each machine of approx $250 - $350 per console sold. If one million consoles sell in the first day of availability Sony will have wiped their entire fiscal gain for all of 2005 in under 24 hours.

In retrospect, Microsoft lost $150 per Xbox (Version 1) console, ending in a 4 billion dollar loss in the lifespan of Xbox (Version 1). With pockets deeper then the Atlantic Ocean, even Microsoft had to re-consider their standings in the console market, thus leading to an abruptly ended Xbox life span. So how will Sony bounce back for a variable $2 billion dollar hole in 2006? Answer is they won't at the price point they have “announced”.

Sony’s official statement in the face of the $599.99 price tag was "The console will not cost $750 dollars", meaning in short, I believe the damage control was laid down not in the face of the price tag being over priced, but more like being under priced. Expect the PS3 to weigh in above the $650 mark for Sony to have a substantial chance at a 2006 fiscal year that doesn’t sink the proverbial ship.

But what does all this mean for gamers as a whole? Basically with an astounding high price, and seemingly useless features for those of us with standard definition televisions or high definition televisions purchased in the past 6 years, we will be purchasing a half-complete machine for a fully complete hi-def included player price. This is Sony’s main hurdle, finding a way around the HDCP protocol. A blu-ray player with a price tag of $100.00 is still worthless to over 350 million Americans which is, I might add, Sony’s main demographic for hardware sales (North America).

Ailing stock prices, poor movie sales and a failing UMD (Sony PSP media) market, might add up to a low-cost buyout in Sony’s future. I personally see this happening regardless of the Blu-ray market by 2014. I for one can just see the looks on Sony’s main competitors faces at this time, all the gleaming in the world coming from One Microsoft way ( the road both Nintendo HQ and MS HQ reside on) as this could turn out to be the largest upset in consumer electronics history.

All this added up, you have to ask yourself. Will the next Playstation you purchase post-PS3 run a Microsoft operating system and have backwards compatibility for PS1 PS2 PS3 Xbox and Xbox360? Putting your rabid love for Sony aside, this doesn’t seem as far fetched as it once did, when the Sony name wasn’t covered in enough red tape to fill the Grand Canyon.

Blu-ray, Cell and a self-destructive obsession with one upping Microsoft, might have possibly put this king to rest... for good.

Stay tuned for the largest train wreck in console history. Comment on this article here."

Posted: 2006-04-12 09:18pm
by Xon
I'm fairly sure Microsoft actually has the cash reserves to buyout Sony, but they arent even in half the markets Sony is in and dont appear to be interested in a bunch of those markets

Posted: 2006-04-12 09:21pm
by Uraniun235
Forty billion dollars is enough to buy out Sony?

Also, don't the Japanese have laws which prevent foreign takeovers of their businesses?

Posted: 2006-04-12 09:21pm
by Admiral Valdemar
Maybe if Sony rolled over and died tomorrow and MS got a huge boost in disposable capital, then it might happen. Sony is far, far larger than MS and if anything, it should be the other way around if Blu-ray wins the HD media war and the PS3 is a hit. I place it as about as likely as the top 2 female porn stars wanting to threesome me in the next five minutes.
Uraniun235 wrote:Forty billion dollars is enough to buy out Sony?

Also, don't the Japanese have laws which prevent foreign takeovers of their businesses?
Sony's profit for FY04 was over $70bn. The guy who wrote this has no clue. Even if Sony died in the console arena, that's like saying Toyota would get bought by Ford if their hybrid cars failed to sell.

Besides, I don't think Japanese law would allow such a takeover anyway, even if MS does suddenly find the money to buy such a zaibatsu.

Posted: 2006-04-12 09:32pm
by Praxis
2004 data:

Assets
Microsoft: $85.94 billion
Nintendo: $9.06 billion
Sony: $68.04 billion

Market Value
Microsoft: $287.02 billion
Nintendo: $12.80 billion
Sony: $38.00 billion


If the PS3 is a hit and Blu-ray wins the HD format war...no way.

Posted: 2006-04-12 09:38pm
by Admiral Valdemar
I've seen people give the same speculation on this scale, but with Apple, thanks to the Intel chip deal and Boot Camp, buying out MS once people see how bloated and delayed Vista is. Far fetched? Yes, but about as credible in reality as this. The fact is, Sony may not be too healthy right now, but they're certainly not getting bought out by, of all people, Microsoft. The problems Sony have been having are down to waiting to get their S Factory online to get LCD TVs with Samsung going well, which some would say is analogous to MS' current problems with getting Vista out. Both are transitional states that carry some financial problems, but the pay offs are high and Sony has regained top spot in their beloved TV market, so I expect MS will get a similar turnaround when Vista comes out.

Besides, a lot of this hinges on how the PS3 is priced, how Blu-ray fares and many other variables that no real analyst would even touch right now, letalone speculate. The worst I can see is a hard hit in their gaming sector, which may put them out of the picture and let the other two thirds of the Big 3 duke it out.

Posted: 2006-04-12 09:41pm
by Duckie
Speaking of that, Admiral Valdemar, if Playstation 3 were to crash due to price and Sony pulls out of this race or the next one, who would be more likely to win?

Nintendo seems to have better odds in my guess. Microsoft has money to throw at it, enough to take a chunk of the market through sheer force, but Nintendo has the Japanese Market (now that Sony is gone) and brand loyalty/trademarked characters that are more recognizable.

Posted: 2006-04-12 09:44pm
by Admiral Valdemar
Honestly, I couldn't say at this point. Given Ninty's rather secretive development of the Revolution and the fact that Sony is the Big Boss right now that everyone is looking to, it's hard to gauge. Nintendo know all about games, since they're dedicated to that unlike MS and Sony, but if MS gets a big boost from Sony crashing and burning, they could become de facto console ruler and remain so for longer than any other given their base.

Posted: 2006-04-12 11:02pm
by Nephtys
Admiral Valdemar wrote:Honestly, I couldn't say at this point. Given Ninty's rather secretive development of the Revolution and the fact that Sony is the Big Boss right now that everyone is looking to, it's hard to gauge. Nintendo know all about games, since they're dedicated to that unlike MS and Sony, but if MS gets a big boost from Sony crashing and burning, they could become de facto console ruler and remain so for longer than any other given their base.
Ninendo hasn't been fighting the same war as MS and Sony since their last generation. They're going after a completely different market. If the PS3 bombs (bombing being relative. Even if they sell a good number, it may not compare to PS1 or 2 profits), they may well lose the edge and allow MS to become the new honcho.

Nintendo's poking at a side market anyway. That's like saying the success of the PSP as a movie player is going to hurt laptop sales.

Posted: 2006-04-12 11:06pm
by RedImperator
Am I reading this article correctly? Even assuming Sony completely crashed and burned in the next eight years (the time frame the author gives), and the Japanese allowed an American company to buy out Sony, and assuming the antitrust boys don't get ants in their pants again, why in the hell would Microsoft want to get into consumer electronics? They know precisely dick about that industry. They'd get their asses kicked in, and unless everyone in Redmond has totally lost their minds, they know it.

Posted: 2006-04-12 11:17pm
by Galvatron
Doesn't the Xbox qualify as consumer electronics? I know I sure thought it was weird when Microsoft announced they were making a video game console.

Posted: 2006-04-12 11:33pm
by Master of Ossus
RedImperator wrote:Am I reading this article correctly? Even assuming Sony completely crashed and burned in the next eight years (the time frame the author gives), and the Japanese allowed an American company to buy out Sony, and assuming the antitrust boys don't get ants in their pants again, why in the hell would Microsoft want to get into consumer electronics? They know precisely dick about that industry. They'd get their asses kicked in, and unless everyone in Redmond has totally lost their minds, they know it.
Microsoft would just buy out the gaming division of Sony.

Posted: 2006-04-13 12:20am
by Max
Admiral Valdemar wrote:
Sony's profit for FY04 was over $70bn. The guy who wrote this has no clue. Even if Sony died in the console arena, that's like saying Toyota would get bought by Ford if their hybrid cars failed to sell.

Besides, I don't think Japanese law would allow such a takeover anyway, even if MS does suddenly find the money to buy such a zaibatsu.
$70bn, eh? Methinks you should check your facts. They did $70bn in SALES ($70bn in profit would be nearly 7x what Microsoft made last FY), and their market value as of writing is around $40bn. Their profits per annum are around $1bn.

The only possible buyer of Sony in the future is Samsung. However, even this is highly unlikely. $40bn is too large even for Microsoft's pockets, and if Sony's turnaround strategy doesn't work, it is more likely that competitors will wait untill it seeks bankruptchy protection, before "ripping the meat off the carcass."

With Sony such an important company to many different industries, it is likely that, were Sony to need it, the Japanese government would step in.

As for the pricetag-it seems VERY likely to be as high as stated so far..and that could cripple sales later on, as Microsoft slashes the price of the 360 to compete and the Revolution comes in competitively priced.

Posted: 2006-04-13 12:41am
by Xon
Like others have said, other companies are only going to buy Sony out once they have crashed and burned and are selling stuff off cheap. Which is still a long way away.

Sony doesnt have many high profit lines.

Microsoft would be basicly only interested in the games line and posible the Playstation IP (so they can sit on it and kill it, or something). I'm sure there would be various patents they would snap up, as well as posible IP for various media owned/controlled by Sony.
Galvatron wrote:Doesn't the Xbox qualify as consumer electronics? I know I sure thought it was weird when Microsoft announced they were making a video game console.
The Xbox is Microsoft's (somewhat)attempt to put a computer(running Windows naturally) in the home entertainment system. They dont care about the rest of the stuff.

They resorted to pushing thier own hardware because no-one else was pushing hardware with a Microsoft OS in it in the home entertainment market.

That really sounds like drugs doesnt it? :P

Posted: 2006-04-13 12:42am
by RedImperator
Galvatron wrote:Doesn't the Xbox qualify as consumer electronics? I know I sure thought it was weird when Microsoft announced they were making a video game console.
The X-Box is at least tangentally related to Microsoft's core business. It's ultimately just a specialized computer designed to operate specialized software, and MS knows all about that. Most of what Sony makes isn't remotely related to software, and Microsoft's wank fantasies about integrating the entire entertainment center into the PC or the XBox aside, can you really imagine Microsoft in the Walkman business?

Actually, I can. I can also imagine a little tiny Walkman sized BSOD.

At any rate, though, MoO is probably right. I should have thought of that in the first place.

Posted: 2006-04-13 02:34am
by Praxis
MRDOD wrote:Speaking of that, Admiral Valdemar, if Playstation 3 were to crash due to price and Sony pulls out of this race or the next one, who would be more likely to win?

Nintendo seems to have better odds in my guess. Microsoft has money to throw at it, enough to take a chunk of the market through sheer force, but Nintendo has the Japanese Market (now that Sony is gone) and brand loyalty/trademarked characters that are more recognizable.
If Sony outright died, Nintendo would take the lead.

Why? Nintendo has good Japanese support. If PS3 died, some might go to XBox 360 but the vast majority of Japanese developers would switch to Revolution, because the 360 has no Japanese presence. The Revolution would get ALL the Japanese games, which means it will get the RPG and Final Fantasy obsessed people. It'll get all the good Japanese games. That means Revolution will COMPLETELY rule Japan and get a significant American marketshare, which should be enough to take a lead worldwide.

However, I doubt Sony's going to die this generation, and certainly not all of a sudden.

And if Sony died gradually it's more likely the 360 would start gaining a Japanese presence and this stuff I said wouldn't applied.

Posted: 2006-04-13 02:55am
by Spanky The Dolphin
Praxis wrote:However, I doubt Sony's going to die this generation, and certainly not all of a sudden.
Hell, I doubt Sony is going to die within a real generation...

Posted: 2006-04-13 07:57am
by Admiral Valdemar
Max wrote:
$70bn, eh? Methinks you should check your facts. They did $70bn in SALES ($70bn in profit would be nearly 7x what Microsoft made last FY), and their market value as of writing is around $40bn. Their profits per annum are around $1bn.

The only possible buyer of Sony in the future is Samsung. However, even this is highly unlikely. $40bn is too large even for Microsoft's pockets, and if Sony's turnaround strategy doesn't work, it is more likely that competitors will wait untill it seeks bankruptchy protection, before "ripping the meat off the carcass."

With Sony such an important company to many different industries, it is likely that, were Sony to need it, the Japanese government would step in.

As for the pricetag-it seems VERY likely to be as high as stated so far..and that could cripple sales later on, as Microsoft slashes the price of the 360 to compete and the Revolution comes in competitively priced.
That should have said revenue, which has been steady or going up in recent times, was just meant to show sales were still acceptable, even if they weren't raking in cash like before (with iPod hitting back at Walkman and the gamble with LCD TVs over plasma even if it was a good call, it hurts your income). Their profits have been somewhat shaky compared to the last decade, but they're certainly not at the "We're going to sell the brand name to the Yanks" stage. They're ticking over still and making money, hell, there are multinationals that run at losses for years without investors calling for any kind of capital sell off.

And depending on how much you think MS could really care about this, they have around $50bn in funds for a rainy day, but only about $5bn is in any real liquid cash. Plus, I doubt anyone holding shares in MS would want them to buy out a company where 90% of its money comes from hardware, something MS hardly knows anything about next to their primary software sector.

I'd also agree with the Samsung idea given how closely the two companies have been working lately, and they sure as hell would rather keep the jobs in Asia along with keeping face, than sell out to an American corporation.

Posted: 2006-04-13 10:12am
by RedImperator
Samsung is Korean. It would hardly be saving face for the Japanese to sell out to them.

Posted: 2006-04-13 11:00am
by Admiral Valdemar
RedImperator wrote:Samsung is Korean. It would hardly be saving face for the Japanese to sell out to them.
They do work together though, and despite Japanese jingoism, they'd be a better contender than an American firm. Though it won't come to that, and if it did, I expect they'd sell off parts to other Japanese companies like Mitsubishi Heavy Industries or JVC etc.

Posted: 2006-04-13 03:56pm
by UCBooties
While the question of Sony as a whole burning seems moot, There does remain the question of their gaming division. If the PS3 is really launching that high above the competitive bench-mark, it's going to be very difficult for most gamers to rationalize, (or afford) the purchase. That's not to say they won't sell their primary launch stock, every system does, but it seems likely that follow-up sales could be significantly weakened by the prohibitive price-point. Just how cheap can they sell the system and still hope to gain profit off of game licensing fees?

Posted: 2006-04-13 05:09pm
by Admiral Valdemar
What this all boils down to is what you're getting the PS3 for. Because we all know that Kutaragi et al have repeatedly stated it's not a console, but a home entertainment system. So, for such a gadget with Blu-ray and HD next-gen media capability, the asking price is low. For just a games machine, I think you're better with the Revolution, which doesn't have delusions of grandeur like the other two systems.

Posted: 2006-04-13 06:21pm
by Lost Soal
The announcement from Sony regarding their launch dates said that they were planning on supplying 1 million units per month.
Are the parts really so expensive that the manufacturing cost per unit isn't going to drop within a reasonable time frame?

The two biggest cost from this system, that I see, are the Cell chip and the Blu-Ray technology. The Blu-Ray at least is likely to start dropping once they begin realeasing stand alone Blu-Ray players. As for the Cell, admittedly I don't know what, but I would imagine Sony has some plans for uses of the chip outside the PS3. Anyone know if they do, and what they are?

Posted: 2006-04-13 07:25pm
by Sharp-kun
Admiral Valdemar wrote:For just a games machine, I think you're better with the Revolution, which doesn't have delusions of grandeur like the other two systems.
I'd disagree, since while I'm unlikely to use the PS3 for media (my PC has TV-out for that reason) I expect the PS3 to have far more games I actually want than the Revolution.

Posted: 2006-04-13 07:34pm
by LordShaithis
I'm just smirking at a mental image of Bill Gates standing in Sony HQ like General Zod in the White House in Superman 2, making the CEO kneel before him.