Investors need to ask: what is management planning to do?
* Restructuring plans for future growth. In a step towards boosting efficiency and reducing costs, SNE unveiled a sweeping restructuring plan to cut 10K jobs, about 7.0% of its global work force, by March 08, along with closing several plants, selling non-core assets, and changing the organizational structure.
* What else? In order to make up for the falling revenues from the electronics and picture segments, SNE finalized its plans to establish a joint venture with NEC for optical disk drives. This venture started its operations in April 06 and is expected to control about 1/5th of the market, with annual sales estimates of about $1.9 billion.
* As a result of this restructuring, SNE expects a reasonable growth in revenues and net income for full FY06.
* Granted these restructuring efforts should help SNE, but management needs to be more clear regarding where it expects the majority of the growth to come from, and whether we will see any more additional taxes [Japanese tax authorities have ordered SNE to pay an estimated $243.00 million in additional taxes, related to its game console and other operations in the US after finding fault with previous tax filings]! After all, restructuring can only take you so far.
* Unfortunately for shareholders of SNE, PS3 lacks earnings power as gaming business is roughly 13-15% of total earnings.
SNE 1-yr chart