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Sony: All Set for Growth

March 29, 2014 | About:
mitu77

mitu77

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With the requirement of storage rising, manufacturers of storage media are focused on acquiring a bigger market share. This rise is attributed to the space hungry customers and growth of sales in smart phones, cloud environment and data centers. Sony (SNE) is one company focusing in a bigger bite of the growing storage market and also challenging its various competitors like SanDisk and Samsung on various fronts. Sony has a diverse product portfolio and is also into flash memory storage devices.

Since Sony is manufacturer of various devices and most of these devices need primary or secondary storage. Sony’s flash drives and SSD’s suffice the requirement of storage in the devices manufactured by Sony, and also as OEM for various other manufacturers. Forward integration of the flash drives and SSD helps Sony to benefit the sales of these storage drives from in house demand.

Sony Mobile is a subsidiary of Sony, it manufactures Smartphones and this has helped growth sales of storage drives manufactured by Sony. The company is also in no doubt for its mobile products and communication (MP&C) growth.

The following factors are driving SSD growth:

  1. New generation Notebooks and Ultrabooks prefer to use SSD rather than conventions HDD.
  2. Price decrease of NAND has made SSDs more affordable and hence leading to higher demand.
  3. Big data requirement in data centers is also driving SSD growth.
  4. Customer’s appetite increasing for storage on their Smartphone and tablets

Financial aspects

The Company recently released its Q3-2013 results. The results recorded growth in the revenue. The results are influenced by increased sale of its smartphones and also Play Station 4 that was launched. The revenue increased by 23.9% ($22,979 million) as compared to year ago quarter. The increase was also mainly due to the favorable impact of foreign currency. Sales increased by 5% year-on-year on constant currency basis.

The company’s operating income was $860 million which also recorded a growth. The company recorded significant improvement in Home Entertainment and Sound. The losses in the television segment also decreased. The growth in the income mainly was again due to the improvement in all business segments of Sony and launch of PlayStation-4.

Road ahead

Future of any company is always dependant on its past decision and strategies. In recent years, Sony released various models of premium smartphones which did not have any external storage slots. The integration of storage devices helped Sony increase its margins and boost its own in-house demand.

After its recent success in Smartphone’s, Sony further plans to expand its portfolio with more Smartphone’s and tablets. This means that there will be higher in house consumption of memory cards at Sony.

With PlayStation 4 already recording many success stories the demand for extended memory storage also helps Sony to boost it sales.

Sony also plans to launch new series of Television. It is focused on the high density TV market and the LED TV market. These products will also help Sony with a brighter future and the journey of 2014 seems to be rosy for Sony.

Competitor

Samsung (SSNLF) provides major competition to Sony to acquire market share for many products that are manufactured by both the companies. The company has also launched its latest Smartphone Samsung S5 on 27-Mar-2015 in Indian market, one of the fastest growing smartphone markets in the world. The price of this phone is targeted to be around $850 will be an important factor to compete against Sony Xperia Z2 which is expected to be on a lower price range with almost same features.

Samsung had posted revenue of $54.95 billion, but the operating profit of $7.7 billion was down by 18% from the previous quarter. This decline in profit is for the first time in last two years. Samsungs’s major revenue is from its mobile division which again there was a decline in profit.

Conclusion

Sony is placed well in this market through its product innovations, launch and acquisitions. The company is also trading at an inexpensive trailing P/E multiple and analysts are expecting solid growth going forward. Hence, Sony looks like a good investment if you prefer to go for long.


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