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SONY VS NINTENDO


  Both Sony and Nintendo released their sales statements for the third quarter, setting the stage for a grim set of final figures. Even though both companies are suffering under the current global economic conditions, Nintendo seems to be left in the shade.


Both Sony and Nintendo released their sales statements for the third quarter, setting the stage for a grim set of final figures. Even though both companies are suffering under the current global economic conditions, Nintendo seems to be left in the shade.

The harshest problem that both companies face is that international demand is declining, and both rely heavily on overseas sales for the majority of their earnings. Moreover, the yen has appreciated considerably against many currencies, resulting in a diluted value of overseas revenues when converted to yen.

This was witnessed in the breaking down of Sony’s financial statements, where revenues were recorded at ¥200 billion in the third quarter 2007, fell to ¥16 billion. The majority of these losses resulted mainly from the exchange rate alone.

Nintendo, however, does not release quarterly figures, rather, it rounds up its figures for the first nine months of the fiscal year. Nintendo’s figures also show losses leading from the exchange rate system, however, losses accounted for only 18% of total. 

Part of Sony’s problem is its diversity. For the most part, its different electronics offerings aren’t mutually supportive. This was especially true of its mobile phone affiliate, Sony Ericsson, which made a big contribution to the ¥45 billion lost by the electronics division.

However, the game division did moderately well for Sony. Even though sales dropped, it managed to bring profits. PS3 software was the only winner amongst all the others. The PS2 system reached the end of its life cycle and PSP sales fell slightly.

Nintendo only provides its results in terms of the total of the fiscal year, of which the holiday season constitutes the third quarter. Some quick math with the previous quarters’ results, however, yield some pretty impressive numbers. Net sales were ¥700 billion, yielding a profit of ¥68 billion, or about $750 million. It’s not all good news though, as of its last quarterly report, net income was running about ¥10 billion ahead of the previous year; now they’re running about ¥45 billion behind, even though operating income is up substantially.

Nintendo DS reached close to 12 million units sold over the holiday season and the Wii picked up another 10.4 million. With this increase in hardware sales, software sales also were driven up. Software sales alone accounted for about ¥250 billion in revenue.

It’s clear that Nintendo has guessed right in designing a console that can appeal to the mass market, one that it acknowledges in its earnings statement: “Nintendo will continue to pursue expansion of the gaming audience and provide products that offer unique entertainment that puts smiles on the faces of people of all ages and genders.” Its focus on that market has helped it avoid having its success in gaming diluted by the broad losses in many divisions that are plaguing Sony, despite the fact that both companies are facing a similar economic problem.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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