http://investorplace.com/2014/09/sony-sne-stock-loss/
Sony Was a Sell Even Before $2 Billion Loss (SNE)
SNE has been dead money for years and doesn't look to change soon
By
Dan Burrows, InvestorPlace Feature Writer | Sep 17, 2014, 1:18 pm EDT
Sony (
SNE) stock reverted to form as something best harvested for tax losses, as SNE tumbled Wednesday after the company said its
full-year loss would come to $2 billion – five times larger than its prior forecast — and canceled its dividend.
Hey, if nothing else, at least SNE admitted it has a problem. It can’t compete with
Apple(
AAPL),
Samsung (
SSNLF) and a host of Chinese competitors. The deep loss stems from a write-down of its smartphone segment.
Sony makes some of the best-reviewed Android phones, such as its top-of-the-line Xperia model, but that hasn’t helped it gain ground against Apple and Samsung, to say nothing of the horde of competitors. In Asia, Sony is getting trounced by cheaper Chinese competitors. And in the must-have U.S. market, it can’t break Apple and Samsung’s grip.
Sony has been in a perpetual state of restructuring for years, so this should be familiar to long-suffering holders of SNE stock. In February, Sony announced that it was getting out of the PC business amid fractional market share and shrinking margins.
As we noted at the time,
consumer electronics have been a loser for Sony. SNE would be better off without its once-great TV business, we argued, but we didn’t see smartphones as such a troubled area as well. It’s hard enough to make inroads against Samsung in Android-powered phones. Now that homegrown Chinese phones are eating up the country’s domestic market, Sony has no chance.
A Strategic Retreat for Sony
Sony isn’t exiting the smartphone business, but it is backing out in a big way. It’s going to focus only on its high-end models, while cutting the number of mid-range phones.
Still, the loss and canceled dividend are just the latest blow in a long string of failed turnaround efforts. As such, the news was a typical if unfortunate letdown for anyone holding Sony stock. After all, they’re used to dashed hope.
If there’s an irony, it’s that this year was actually looking up for SNE for a change.
Before the profit warning, SNE has gained 17% for the year-to-date, beating the
S&P 500 by about 9 percentage points. That was an unusual place to be for this long-time laggard. Pull up a chart for SNE and you’ll see years of portfolio-burning returns.
SNE lags the broader market by more than 20 percentage points over the last 52 weeks, more than 60 points over last three years, and more than 100 points over the last five years. Indeed, since the bear-market bottom of early 2009, the market is up more than 150%. Apple is up more than 600%. SNE, meanwhile, is flat.
In one of the greatest bull markets in history, SNE has been dead money — at best.
Some analysts are actually bullish on SNE for this strategic retreat. The writedown was well telegraphed and could represent the beginning of the end for Sony as a major player in consumer electronics — something that has been a long time coming.
This sprawling enterprise has a number of competitive and profitable segments, like its film and TV division. The sooner it focuses on what it’s good at, the better.
That said, SNE has been such a disappointment for so long, it’s become a show-me stock. Until Sony can prove it’s finally on the correct course, there’s no reason to hold SNE.
