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Abenomics Crushes Sony: Electronics Giant Forced To Cancel Dividend For First Time Ever

Tyler Durden's picture




 

It was over a year ago, when contrary to the propganda spewed on a daily basis by the Japanese government hell bent on destroying the domestic economy, now suffering its Keynesian death rattle, just to push stocks to highs which nobody except for a few thousand people will be able to monetize on, that the CEO of Sony explicitly warned that "the preconception is that a weaker Yen is good overall. Unfortunately for us, versus the USD, it goes the other way... we are actually at a disadvantage." He wasn't kidding and just under a year later, back in May, Sony shocked everyone when the electonics giant not only posted a massive net loss of $1.3 billion, far worse than previously expected, but also slashed its profit outlook by 70%.

Fast forward to today, when minutes ago the Yen hit another multi-year low against the dollar, which sure enough, is great for the nominal value of Japanese stocks, if horrible for the actual Japanese companies, the Japanese middle class, and pretty much everyone except for a few superrich people. Such as Sony. Because the (now former) electronic giant, which once upon a time was the target of an activist campaign by none other than Dan Loeb who mysteriouly saw value in the company, once again stunned everyone when it reported overnight that it expects its annual loss to swell to $2 billion, but, far worse, canceled the payment of its dividend for the first time ever after writing down the value of its troubled smartphone business.

 Needless to say, Sony's stock which doubled in 2013 for the completely wrong reasons, is now crashing.

And while guiding lower is a staple of virtually all companies in the New Normal, halting dividends can mean only one thing: the end of the road may finally be in sight.

From AP:

For the first time since going public in 1958, the Japanese electronics and entertainment conglomerate canceled dividend payments for the half- and full-year. "This is the very first time we ever eliminated a dividend," said Sony's president Kazuo Hirai. "For more than 50 years we always paid a dividend. The entire management takes this very seriously."

 

The company plans to cut staff in its mobile communications business by about 15 percent, or roughly 1,000 people, Hirai said. Details of that plan are to be announced later.

But... Abenomics is an economy-boosting miracle. Oh wait, there we go again confusing the economy with a stock market priced in devalued currency terms.

Sony has been trying to reshape its business after years of red ink and has repeatedly promised turnarounds without delivering. It said the bigger loss for the current fiscal year stems from a lower valuation of its mobile phone business due to weaker than expected sales. The company is recording an "impairment charge" of 180 billion yen ($1.7 billion) in the July-September quarter.

 

The charge is purely an adjustment to the company's balance sheet, involving no cash, but it reflects that the mobile business is far less valuable and will generate lower profits than previously thought.

 

The smartphone business has proven particularly tough for Sony. Apple and Samsung dominate at the top end while Chinese and other Asian manufacturers are hogging the market for cheaper phones that are most likely to appeal in fast-growing developing countries. Hirai said Sony had not managed to stay ahead of sea changes in the industry.

 

"The Chinese smartphone manufacturers have made great strides and are expanding outside their own market, and this has caused a shift in the pricing," he said. "Meanwhile, Apple and other manufacturers are launching strong, innovative products. The changes are very rapid and dramatic." Hirai said Sony expects a loss in its mobile business this year, but would return to profit by cutting costs and focusing on higher end devices. It is also positioning itself for future growth in smartphones and mobile technology.

 

"We have to be in the competitive landscape in the next stage and be ready for that evolution," he said. Sony intends to leverage its vast archive of music and movies, network services and technology to compete.

But... we thought all it took to boost trade, sends exports soaring and raise your GDP, was to crush your currency, while obliviously keeping everything else unchanged and telling corporate CFOs to just hang tight and that any minute now EPS nirvane would be upon them.

It there really more to being competitive in today's world than selling products at a low, low FX-adjusted price. Oh, forgot to mention: products which nobody wants regardless of the price?

Could it be that finally Japan is waking up to what we said in January of 2013, namely that just crushing your currency will do nothing for the underlying economy, and as Sony has shown, actually lead to ongoing corporate devastation and soon, widespread bankruptcies?

In a parallel note, Bloomberg reports something else we warned in January of 2013, namely that "business leaders in Western Japan warned central bank chief Haruhiko Kuroda that the yen’s slide to a six-year low is boosting costs of imported raw materials and fuel and may spell trouble for the economy."

Companies in the industrial city of Osaka report that their profit margins are deteriorating as they can’t pass along the higher costs even as sales rise, Osaka Chamber of Commerce and Industry Chairman Shigetaka Sato told Kuroda at a gathering yesterday. Kansai Economic Federation Chairman Shosuke Mori said the rise in fuel costs warrants close monitoring.

 

“It is a source of concern, that given the recent rapid yen weakness, the negative aspects such as rising import costs will become more prominent,” said Sato, who is also chairman of Keihan Electric Railway Co.

 

The comments underscore the burden that the cheaper yen is putting on the world’s third-biggest economy even as it gives a tailwind to the Bank of Japan’s effort to spur inflation. Kuroda said the currency moves don’t pose a problem for Japan and that it’s natural for the dollar to rise against the yen as the U.S. economy improves.

Golfclap. Now we just wonder how long it will take Japan to figure out the last thing we said in January 2013, namely that Abenomics was never meant to boost the Japanese economy, and was entirely geared to boosting the global, and mostly the US stock market, courtesy of some $75 billion in fungible liquidity thanks to the BOJ every month. Of course, if and when Japan does figure out what was painfully obvious to anyone who is not an idiot, Abe may need something far stronger than diarrhea to escape the rightful vengeance that the people will demand upon his head and other parts of his body.

Sadly for Sony, it will probably be too late.

 

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Wed, 09/17/2014 - 12:30 | 5226576 Agent P
Agent P's picture

Sony guts!

Wed, 09/17/2014 - 12:38 | 5226591 pods
pods's picture

Next year they are going to come out with a new Discman with enhanced stabilization. 

They will kill it.

Loved the Discman, it made everyone a waiter when they wanted to move while playing it to avoid a skip.

But, the skirts were short and we didn't have the government as intent on mapping every single curve of our inner spaces as we do now. 

I'd take that.

pods

Wed, 09/17/2014 - 12:41 | 5226593 hedgeless_horseman
hedgeless_horseman's picture

 

 

http://www.youtube.com/watch?v=yTsYWZYNAbk

On the Ginza strip the 100th building
On the 100th floor
Dream team life enhancing
Behind the 100th door
Sukiyaki carried me to this place
Have to hari kari if ever I lose face

Western girls at Lexington Queen
Are the prettiest girls I ever seen
I'd gladly part with hard earned Yen
Just so I could be with them

Chainsmoking at the Singalong Bar
Wedged into the Subway Car
Heat up some more rice wine
Somebody just jumped on the line

Robots have run amok on the factory floor
'Bin 20 years at Sony and I can see 20 more
Hi-tech sex, wireless sets, samurai
Western ways, baseball games, apple pie

Though some will say we imitate
Produce the goods at a cheaper rate
Faster too reduced in size
Our ingenuitys' realised

I had to grab a massage cab
I left my briefcase at the lab
Godzilla ate the bullet train
Wont see Kyoto ever again

Now Papa jumped the gun back in '41
Following the flag of the rising sun
When Tojo did the Mojo
He was downed in flames
U.S. Destroyer - Kamikaze planes

The West don't learn from history
Doomed to repeat it endlessly
We put the past on to Fuji
Then we erase it totally - Yeah!

Soon we'll be known as Great Japan
Just like they do in Great Britain
Spelt microchip and solid state
The things that made this country great

Sony

Wed, 09/17/2014 - 13:00 | 5226648 Anusocracy
Anusocracy's picture

Didn't Sony get out of robotics?

Wed, 09/17/2014 - 13:24 | 5226750 max2205
max2205's picture

Print MOAR!

Wed, 09/17/2014 - 14:47 | 5227186 JuliaS
JuliaS's picture

Like any big corporation, they eventually became a finance company.

Wed, 09/17/2014 - 12:45 | 5226602 Dr Strangemember
Dr Strangemember's picture

I can't recall by name one of Sony's current products... that's nuts!  Sony used to market their products as obnoxiously as Apple does today.  

How the mighty evenually fall (unless they get a smooth gov bailout that is).

Wed, 09/17/2014 - 15:07 | 5227276 JuliaS
JuliaS's picture

A friend has one of the first tape deck made by Sony. Almost pure metal. Works to this day. Only thing he had replaced were the rubber belts. He got robbed once. Thiefs were loading his house possessions into a moving truck when he came home early and spooked them. The burglars drove away in a hurry without securing the payload. The deck was sitting right on the edge and fell off onto solid pavement about 5 feet. Tumbled a few times.

The freind returned to his nearly empty apartment, plugged it in and it still worked. He keeps it as a souvenir - a reminder of Sony's former quality.

Now everything's made in the 3rd world.

I remember the early days of the Fukushima disaster. People were worried that the earhquake and tsunami would affect car exports out of Japan, to which the ministers assured everyone it wasn't a concern, since 80% of Japan's manufacturing base was actually located in China.

Thank god for that!

/sarc

Wed, 09/17/2014 - 12:31 | 5226577 NotApplicable
NotApplicable's picture

I didn't even know they made Phoneman.

Also, did they miss the memo about debt-fueled stock buybacks?

Wed, 09/17/2014 - 13:55 | 5226901 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Also, did they miss the memo about debt-fueled stock buybacks?

When you are losing money left and right, keeping the boat afloat is more important.

Wed, 09/17/2014 - 12:30 | 5226578 drink or die
drink or die's picture

It won't be the last time either I would guess.

Wed, 09/17/2014 - 12:32 | 5226580 nope-1004
nope-1004's picture

Why doesn't Abe do what we do in America with old, out of touch businesses like GM and Goldman Sachs:  Bail them out!  The real economy sucks so better to get free printed linen from the gov to keep the illusion alive rather than face obsolescence.

Consumers like it too, because it gives us ultimate choice.

Wed, 09/17/2014 - 13:02 | 5226663 Tenshin Headache
Tenshin Headache's picture

Brilliant! Then follow up with subprime electronics loans!! And securitize those!!!

Wed, 09/17/2014 - 12:31 | 5226581 LawsofPhysics
LawsofPhysics's picture

I wonder how many TBTF banks are already short?

same as it ever was...

Wed, 09/17/2014 - 12:32 | 5226582 ParkAveFlasher
ParkAveFlasher's picture

iWalkman!

Wed, 09/17/2014 - 12:36 | 5226588 Duude
Duude's picture

Sony could always pay their dividend in Japanese government bonds.  Shareholders won't be too keen on it, but it will provide Sony with another market to dump all the government bonds the country has been forcing upon them over the years.

Wed, 09/17/2014 - 12:43 | 5226595 Bell's 2 hearted
Bell's 2 hearted's picture

hhmm, must be a different culture over there

 

suits here would have borrowed (no matter their existing debt level) to pay dividend ... actually, would have borrowed even more to cover dividend and stock buyback announcement (buybacks soothe the pain of any actual earnings report) ... stock would have left the launchpad ...

Wed, 09/17/2014 - 12:42 | 5226596 Downtoolong
Downtoolong's picture

canceled the payment of its dividend for the first time ever

As I recall, this was also a harbinger when Citibank crashed to become Shittybank.

 

Wed, 09/17/2014 - 12:44 | 5226604 reader2010
reader2010's picture

The thing is those Chinese who assemble Sonys don't suicide and those who assemble Apples do. 

Wed, 09/17/2014 - 12:48 | 5226608 Wild Theories
Wild Theories's picture

Come on now, Sony has been sucking balls for quite a while now, they were gonna get to this point Abenomics or no Abenomics.

Be fair to Abenomics now, Tylers, be fair.

Wed, 09/17/2014 - 12:51 | 5226617 ejmoosa
ejmoosa's picture

Agreed....this has more to do with innovation and prodict development than it does Abenomics...

 

And maybe, it's just because most of us have more crap than we can already use.  

Wed, 09/17/2014 - 12:59 | 5226645 dracos_ghost
dracos_ghost's picture

Nah. In the 80's people bought cheaper Japanese stuff because US stuff was more expensive. Now the Chinese make cheaper stuff than the Japanese. Circle of life.

Vaio computers, Bravo TVs are pretty good but not worth the extra premium. PS4 is a beast for a console but the price? Fuggetaboutit. The entertainment division is the one that seems to be sucking wind from the press releases. Hollywood flops, music industry implosion are really biting into the bottom line. I'm not sure that's a function of lack of innovation or lack of understanding of the current marketplace.

Wed, 09/17/2014 - 14:26 | 5227051 Overfed
Overfed's picture

Japanese stuff was both less expensive and in most cases, of  vastly superior quality. Chinese stuff is only cheaper.

Wed, 09/17/2014 - 22:49 | 5228781 Wild Theories
Wild Theories's picture

Their corporate philosophy became too dominated by greed. They went from a company that made stuff into a company that milked stuff. 

They chose to rest on their early crown and milk every cent out of the brand premium. Instead of continuing to make quality products at affordable prices, which is what the original walkman/discman and earlier Sony products were, they opted to make quality products for exhorbitant prices for phat profits. Instead of keep looking for new products to make, they looked for new ways to milk what they already have.

It worked for the first 10 years when everyone else was cheap and low-quality, then their low quality competitors became semi-decent quality, and finally their competitors reached an equitable and better quality/price ratio than Sony, even though their absolute quality may still be lower than Sony, their quality/price(bang for the buck) ratio is better, and consumers voted with their wallets.

Wed, 09/17/2014 - 13:00 | 5226651 Tenshin Headache
Tenshin Headache's picture

Did Abenomics hasten their demise?

Wed, 09/17/2014 - 12:55 | 5226621 Elliptico
Elliptico's picture

I recently worked for a very large Japanese electornics company, also in trouble.  Form what I saw, late '50's and early '60's don't-rock-the-boat lifers with jet black hair run the show.  That and the incredibly consultative decision making process may contribute to the lack of competitiveness.

Wed, 09/17/2014 - 12:53 | 5226622 youngman
youngman's picture

They used to have the best TVs..I had several...weighed a ton...yes a big fall from grace...as will Apple in time..

Wed, 09/17/2014 - 12:56 | 5226627 Yen Cross
Yen Cross's picture

   Yeah, right Abe... devaluing your currency 43.00% over 2 years doesn't have any consequences on the economy.

   I hope you had a good bunker under Mt.Fuji built, for when the serfs come for you head, when the wheels come off your Abenomics cart.

Wed, 09/17/2014 - 12:59 | 5226641 Seasmoke
Seasmoke's picture

And now I know how Joan of Arc felt
As the flames rose to her Roman nose
And her Walkman started to melt ...

Wed, 09/17/2014 - 12:59 | 5226642 Spungo
Spungo's picture

Fuck Sony and their shitty products. I always hated how Sony products would randomly shut off because the power cable sucks balls.

Wed, 09/17/2014 - 13:01 | 5226654 richiebaby
richiebaby's picture

We need mor hit mobies! Iza Tom Cruise abalable?

Wed, 09/17/2014 - 13:04 | 5226667 Spungo
Spungo's picture

Why Sony products are better:

https://www.youtube.com/watch?v=eBpYih7Auns

Wed, 09/17/2014 - 14:35 | 5227118 GoldbugVariation
GoldbugVariation's picture

That's not a real ad, it's from the movie Crazy People. http://en.wikipedia.org/wiki/Crazy_People

Wed, 09/17/2014 - 13:05 | 5226669 orangegeek
orangegeek's picture

all right, who wants a playstation????

 

LMFAO!!!!!

 

this joke company hasn't done squat to innovate.

Wed, 09/17/2014 - 13:12 | 5226696 FrankDrakman
FrankDrakman's picture

I stopped buying Sony after their infamous root-kit on their CDS:

The Sony BMG CD copy protection rootkit scandal of 2005–2007 concerns deceptive, illegal, and potentially harmful copy protection measures implemented by Sony BMG on about 22 million CDs. When inserted into a computer, the CDs installed one of two pieces of software which provided a form of digital rights management (DRM) by modifying the operating system to interfere with CD copying. Both programs could not be easily uninstalled, and they created vulnerabilities that were exploited by unrelated malware. Sony claims this was unintentional. One of the programs installed even if the user refused its EULA, and it "phoned home" with reports on the user's private listening habits; the other was not mentioned in the EULA at all, contained code from several pieces of open-source software in an apparent infringement of copyright, and configured the operating system to hide the software's existence, leading to both programs being classified as rootkits.

They thought it was marketing genius, but there are a million nerds out there who will never buy, recommend, or give a gift of Sony anything as result. Karma is a bitch!!

Wed, 09/17/2014 - 13:36 | 5226800 yogibear
yogibear's picture

Abenomics  is the US Federal  Reserve's grand printing experiment.

The world get's to see how the Federal Reserve's grand printing experiment ends.

The US implodes the same way, just later.

Enjoy the preview. 

Wed, 09/17/2014 - 13:36 | 5226803 Infinite QE
Infinite QE's picture

Sony is the GM of Japan. Lost their edge decades ago. The Koreans whooped 'em in televisions.

Wed, 09/17/2014 - 13:37 | 5226805 Sandmann
Sandmann's picture

Sony became cocksure in 1990s growing their video division to a scale bigger than Masushita and full of hubris. I saw it and how they were chasing rainbows trying to compete in every segment by transferring technology to China. They ended up failimng to develop LCD and LED displays, were out of the PC business and focused on overpriced laptops. They had given their marketing nous away to Apple which used them as an OEM manufacturer.

Sony failed to innovate and became American simply changing the fascia plate and trying to create proprietary formats to control markets. They had too much chaos in divisions and let quality slide.

Funny how they game the game awayu to Samsung

Wed, 09/17/2014 - 21:54 | 5228652 Wild Theories
Wild Theories's picture

and many ex-Sony engineers are actually working at Samsung and other Korean companies.

Wed, 09/17/2014 - 13:50 | 5226871 vyeung
vyeung's picture

Thank the fascists in the Fed as the financial policies are strong armed by the US Fed. As I said before, any nation that is a part of the fascist/Nazi network is doomed.

Wed, 09/17/2014 - 13:53 | 5226892 thamnosma
thamnosma's picture

Well, this is far from a trend but if we begin to see other companies dumping dividends it will be a good sign the gig is up.

Wed, 09/17/2014 - 14:08 | 5226960 Jack Burton
Jack Burton's picture

SONY, in the 80's turned the field of consumer electronics from an American led low quality, high priced, poor performing and short lasting device market, to a world of magnificent engineered design and manufacture of long lasting low failure rate modern consumer devices. I once, as a kid, used to fix local TV sets for people, all American makes. One time a person asked me could I fix a Japanese TV which was victim to a lighting stike. I said I could look, but had no where to get schematics for a Japanese device. I looked into it as a curious kid and found a design perfection that blew me out of the basement! Lucky it was just a minor power supply blow out. But I asked to keep the set for a week so I could go over it from top to bottom. I knew even as a teenager that American consumer electronics were DEAD!  It was like "The Flintstones" meets the "Jetsons" for you older types!

Wed, 09/17/2014 - 14:11 | 5226973 Fuku Ben
Fuku Ben's picture

2 Minutes to Midnight

And All is Weeell!

Wed, 09/17/2014 - 14:14 | 5226988 Hannibal Barca
Hannibal Barca's picture

Put them down. Don't like their products anyway :)

Wed, 09/17/2014 - 14:31 | 5227071 GoldbugVariation
GoldbugVariation's picture

I like my Sony XPERIA phone. Nice gunmetal grey color, made for man-sized fingers and it doesn't look like a candy bar or a kid's toy. Solid metallic construction, firm to hold, great screen, great battery life, great reception meaning decent quality phonecalls ... I could go on... And waterproof so I can spill my beer on it, drop it in the bathroom etc (both have happened) then just put it under the faucet and use soap and water to clean it right up again.
It can also be used as an underwater camera, which is pretty neat. These are all the things which should be important to any smart person buying a smart phone.

Unfortunately, Sony didn't realize that if you want to cut it in the smartphone market, it's no good making a product which appeals to someone like me. You need to make a product which appeals to women and teenage kids.

RIP, Sony.

Wed, 09/17/2014 - 15:14 | 5227309 adr
adr's picture

I love my Experia phone. I toss it in fountains and drop it on concrete in front of Apple geeks just to see the look of horror on their faces.

They are stunned when I pick up the phone without a scratch. They then ask what phone is that and how much I paid. I tell them Sony and $.01 on contract.

I like the video of a guy using his Experia Z to hammer nails. Eventually the screen cracked, but after the third nail. The phone still worked.

Wed, 09/17/2014 - 16:20 | 5227533 TalkToLind
TalkToLind's picture

Sony products:  NEVER AGAIN!  I applied one of their firmware updates to my Sony Blu-ray player right from the machine's update menu...it bricked the machine.  I contacted Sony and gave them a chance to make it right at no expense to me; they refused. From that moment on Sony products been banned from my household and that was 4 years ago.  Yep, I'm a stubborn son of a bitch who doesn't forget.  Fuck Sony.

Wed, 09/17/2014 - 17:53 | 5227893 robertocarlos
robertocarlos's picture

My Sorny Tritron only lasted 17 years.

Thu, 09/18/2014 - 12:52 | 5230551 Watchingtheweasels
Watchingtheweasels's picture

What value is left in Sony is in the Playstation 4. Apple should consider buying Sony and getting the final puzzle piece they lack in a comprehensive consuner electronics ecosystem.

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