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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 14293  
Subject: Re: Sony's horrendous management Date: 11/26/2013 10:42 AM
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Sony makes wonderful TV's. Last year I researched all of them and bought
their top of the line 950. Since I enjoy TV a lot when I watch it, I
thought it was worth the $3400 (I got it cheaper). It was everything I expected.
Out of the box, the picture was and remains gorgeous. So why do I think Sony has horrendous management?

Another answer to that question:
Sony loses money making TVs. Huge amounts of money. They have done so steadily for many, many years.
When asked about whether they might one day close or sell this lossmaking division,
which for a shareholder amounts to nothing more than a very expensive hobby,
management said "We'll never stop making TVs. Our engineers are very proud of them."
So, I guess the costs of that division should be booked under "employee benefits".

A more quantifiable essay on exactly how bad management is.
"Wow, so this is pretty awful. In the past [22] years, Sony has only generated a doubt digit ROE *twice*. Just twice. "

The worst thing is that this is so typical of so many Janapese firms.
They don't even seem to have ever heard of the notion that deploying capital
wisely is even a good idea, let alone a goal, let alone the only important one.
Absent changes in valuation multiples, the longer you hold a stock the
closer your returns will approximate the firm's ROE on newly deployed capital.

For a sense of scale, among companies over $500m market cap in Japan,
18% of them have five year average ROE over 10% and 6% have average ROE over 15%.
The equivalent figures for the US are 38% (versus 18%) and 22% (versus 6%).
Oddly enough, the only group who seems to realize there's a problem is the stock exchange.
There's a new index one of whose key criteria is high returns on capital.
The new JPX-Nikkei 400 will be one to watch.
But the quote that sums things up: “Ultimately ROEs are low because people
don’t really care,” says Kathy Matsui, chief Japan strategist at Goldman Sachs.

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