I just happened to notice a real firecracker of a post on Google groups about Sony’s (SNE) stock by a user named creepeth. The title of the entry is “The problem with SNE” (reference to Sony’s NYSE symbol), and features five reasons why he thinks Sony will have a very tough time in the future finding the consistent success it had years ago. While we don’t necessarily agree with some of the points, there are also some undeniable truths present. I share this writing because I think it is fascinating to chronicle the people’s perspective on this company – good and bad. Feel free to reply with your thoughts as well.
Disclaimer: The following quote from Google Groups does not reflect the opinion of Sony Insider. 🙂
The problem with investing in Sony is voluminous. I’m a huge Sony fan, so it hurts to me to write this blog.
1.) The economy. Let’s face it, Sony specializes on luxury goods. I am using the economist’s definition of “luxury good”. Nothing Sony sells is necessary to proceed in your day-to-day life. As there seems no end to the recession in sight, there seems no end to the bleak outlook of the entire consumer electronics sector. Who here thinks we’re anywhere near the bottom? In the past, consumer sales from Black Friday through Christmas have bolstered the market. That will DEFINITELY not be the case this upcoming holiday season, less than 2 weeks away.
2) Nothing in the entire Consumer Electronics industry currently is so far above and beyond what people already have in their living rooms. There is no breakthrough must-have technology currently that didn’t exist already a year ago when the consumer electronics market was still strong. If people really wanted high def, they bought it last Christmas. Sure there is 120Hz LCDs, but do you really need to replace your 60Hz LCD TVs? Are the laptops in the market so much better than what you got a couple of years ago? Is 7.1 surround sound so much better than 5.1? Is the image of Blu-ray so much better than an upscaled DVD? Is it really necessary to replace your 7.1 megapixel camera with a 10.1 megapixel camera?
3) Sony no longer is the clear-cut choice for those who want the best in electronics. For home-audio, Sony never held the high-end market. But they sure did dominate the low-end and mid-range markets. But for the various price points, $200 for a low-end receiver, and $500-1000 dollar mid-range receiver, Sony has lost a ton of market share to the likes of Onkyo, Harmon Kardon and Yamaha. For LCD TVs, Samsung has stolen Sony’s thunder. If you want the best hi-def TV, you really need to examining both Sony and Samsung. In the past, Sony was the clear-cut choice of those who wanted the best image.
4) The Yen. The yen has been surging in 2008, and that has cost Sony, who sells majority of their products overseas, badly in 2008. The volatility, and the incredibly weak world economy lends Sony to a lot of currency volatility. It’s a beta you have to consider when you invest in Sony.
5) Nothing explosive is on the horizon. For the audio- and videophiles out there, you know what I’m talking about. What technology is out there that is going to change consumer electronics in the near future? OLED TVs? Nope, $10,000 is too much for a TV that is slightly thinner. PS4? that’s beyond 5 years away. @Home for the PSN? Not a system seller yet. Super High-Def? High Def hasn’t even hit its stride yet.
As much as I love Sony and believe in the PS3, Sony Electronics isn’t just about the PS3. It’s about a horrible global economy, stagnant consumer-electronic market, increased competition from Korean electronics companies, volatile yen, and the mere incremental improvements in the technology for the foreseeable future.
Good luck to those who are bullish on this gem of the past. I need more convincing to go long on SNE.
Personally, one thing I must contest is the difference of Blu-ray and an upscaled DVD. I recently watched Casino Royale in epic 1080 with full surround on my friend David Scherer‘s 62″ Sony and it was one of the best home theater experiences I’ve ever had. If you watch Blu-ray on the right equipment there is a difference and it is very noticeable.
