sony

SONY CORP. ADRs, $16.82, New York symbol SNE, gained 7% this week after it said it would consolidate its money-losing TV operations as a separate firm by July 2014. That should make it easier to sell in the future. In the meantime, Sony will focus on making high-end ultra high-definition TV sets, which are more profitable than current TVs. As well, the company has agreed to sell its struggling Vaio personal computer operations to a private equity firm, though it will hang on to 5% of this business for now. These moves make sense, because intense competition has made these products less profitable. They will also let Sony focus on its more-promising products, like its PlayStation video game console....

INTERNATIONAL FLAVORS & FRAGRANCES INC. $88 (New York symbol IFF; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $7.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.iff.com) produces compounds that improve the taste of food and make consumer products smell better. The company continues to benefit from rising demand in fast-growing markets like China, India and Turkey. In the three months ended September 30, 2013, sales in these countries rose 8% and now supply 48% of IFF’s total. That helped push up the company’s overall sales by 4.7% in the quarter, to $742.3 million from $709.0 million a year earlier. Earnings per share gained 13.0%, to $1.22 from $1.08. IFF is a buy....

SONY CORP. ADRs $19 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.0 billion; Market cap: $19.0 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.4%; TSINetwork Rating: Average; www.sony.com) now plans to make fewer than 20 movies a year, down from around 23 in previous years. That’s due to big losses on films like White House Down and After Earth.

Instead, the company plans to expand its better-performing television production business. Sony currently produces 38 series, including popular shows like Breaking Bad and The Blacklist.

Making TV shows is less expensive than feature films, which lowers risk and enhances potential profit.

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These two big electronics makers have seen their shares rise sharply since the start of 2013. That’s mainly because they have restructured and cut their operating costs. However, we prefer Philips for new buying, because its focus on medical equipment and lighting cuts its exposure to fickle consumer tastes.

PHILIPS ELECTRONICS N.V....

SONY CORP. ADRs $21 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.0 billion; Market cap: $21.0 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.3%; TSINetwork Rating: Average; www.sony.com) has rejected a plan from Dan Loeb, an activist investor who owns 7% of the company’s shares. Loeb wants Sony to sell 15% to 20% of its entertainment division, which makes movies, TV shows and music recordings and accounts for 16% of Sony’s revenue.

The company feels that owning media content gives it an edge over other electronics makers.

Meanwhile, Sony’s revenue fell 9.8% in its fiscal 2014 first quarter, which ended June 30, 2013, to $17.3 billion from $19.2 billion a year earlier. That’s partly because the company sold its chemical operations in September 2012. Weak camera demand also hurt its revenue.
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SONY CORP. ADRs, $20.15, New York symbol SNE, fell 7% this week after the company rejected a plan from Dan Loeb, an activist investor who owns about 7% of Sony’s shares. Loeb wants Sony to sell 15% to 20% of its entertainment division through an initial public offering. This business, which makes movies, television programs and music recordings, accounts for about 16% of Sony’s revenue. However, the company feels that owning entertainment content gives it an edge over other electronics makers. Moreover, Sony is making more movies and TV shows in partnership with other studios, which should cut the entertainment business’s costs and improve its profits....

Advanced Micro Devices Inc., $3.75, symbol AMD on New York (Shares outstanding: 714.5 million; Market cap: $2.7 billion; www.amd.com), makes computer chips. The company produces microprocessors for desktops, laptops and servers, including its Athlon, Turion and Opteron designs, which are compatible with Microsoft Windows applications. AMD also makes circuits for communications equipment and graphics processors through ATI, which it bought for $5.4 billion in 2006. AMD continues to face strong competition from other chipmakers. At the same time, more consumers are switching to mobile devices and away from desktops and laptops. That’s cutting demand for the company’s chips....

Please note: The next Wall Street Stock Forecaster newsletter issue will be sent out on Friday, May 31, 2013. HEWLETT-PACKARD CO., $24.21, New York symbol HPQ, reported lower earnings this week. Even so, they still beat the consensus forecast. That’s why the stock rose 14%. Hewlett earned $1.7 billion in its fiscal 2013 second quarter, which ended April 30, 2013. That’s down 12.9% from $1.9 billion a year earlier. Earnings per share fell 11.2%, to $0.87 from $0.98, on fewer shares outstanding. These figures exclude several unusual items, mainly costs related to a restructuring plan that includes merging Hewlett’s personal computer and printer divisions, simplifying its product lines and cutting 8% of its workforce. On that basis, the latest earnings beat the consensus estimate of $0.81 a share....

Please note: The next issue of Wall Street Stock Forecaster will be sent out on Friday, May 31, 2013. SONY CORP. ADRs, $20.34, New York symbol SNE, jumped 14% this week after Dan Loeb, an activist investor who owns 6.3% of Sony’s shares, announced a plan aimed at unlocking some of the company’s value. Loeb is the same investor who pressed Yahoo! Inc. (Nasdaq symbol YHOO) to replace its chief executive officer with Marissa Mayer, a former vice-president at Google (see below). Loeb’s plan involves sell 15% to 20% of Sony’s entertainment division through an initial public offering. This division, which makes movies, television programs and music recordings, supplied just 17% of Sony’s revenue in the fiscal year ended March 31, 2013. But due to large losses at Sony’s TV and cellphone divisions, the entertainment business accounted for a high 45% of the company’s earnings....

WAL-MART STORES INC., $70.40, New York symbol WMT, reported better-than-expected earnings this week. In its 2013 fiscal year, which ended January 31, 2013, Wal-Mart’s sales rose 5.0%, to $469.2 billion from $447.0 billion in fiscal 2012. Acquisitions added $4.0 billion to its 2013 sales. However, unfavourable currency exchange rates cut sales by $4.5 billion. If you disregard currency rates, Wal-Mart’s sales would have risen 5.1%. Sales at the company’s U.S. stores (which supply 59% of the total) rose 3.9%, and same-store sales gained 1.8%. That’s mainly because Wal-Mart’s ongoing cost cuts are giving it more room to cut its prices. Sales at the international stores (29% of the total) gained 7.4%, while sales at the company’s Sam’s Club warehouse outlets (12%) rose 4.9%....