Sony Chairman said what??!!...SONY shares are overvalued...guess this is why the further slide...starting to have flashbacks of Steve Balmer stating the MSFT was overvalued...does this strange to anyone else here?...kinda like someone putting a terrific bid on a house I'm selling and me telling the seller I think he is paying too much....GEEZ!!:|
Reuters Finance News
Sony Sends Rare 'Bubble' Alert on Shares
By Yuko Inoue Jan 6 4:07am ET
TOKYO (Reuters) - Sony Corp's president Nobuyuki Idei told Reuters on Thursday that his company's shares were overvalued, unleashing a ``Sony shock' slide in Japan's high-tech sector and helping drive the entire Tokyo index lower again.
The outspoken Idei said that 20,000 yen ($192) was an appropriate price for his company's stock, given its current earnings levels. Anything above that would be ``a bubble,' he added. On Thursday, Sony was trading around 25,700 yen.
``When our earnings levels are considered, the appropriate price would be about 20,000 yen. Above that would be a bubble,' he said when asked what an appropriate share price would be for Sony, viewed here as one of the bluest of Japan's bluechips.
Sony's shares, which were already in a short-term downward correction due to the sagging U.S. stock market, collected massive sell orders after Idei's remarks hit the market and remained ask-only without any buyers for most of the afternoon.
It closed at 25,700 yen after declining a daily limit of 2,000 yen or 7.22 percent in the morning, and off 20 percent from an all-time high of 32,250 hit on Tuesday.
Analysts said Idei's remarks, while surprising coming from the chief executive of a company, were on the mark.
``Sony's stock prices had climbed too high, too fast, with expectations getting ahead of reality,' said Hitoshi Kuriyama, analyst at Merrill Lynch Japan. ``It has now moved into a normal adjustment phase.'
Idei, who was attending a reception for an industry group, said he felt uneasy with the share price's sharp rise on Tuesday to above 30,000 yen.
SONY WARNING FRIGHTENS OTHER HIGH-TECHS
The shock warning, which came during the Tokyo market's lunch break, also shook investor confidence in similar high-tech issues, which have climbed in recent months amid a frenzy for Japanese technology stocks.
Idei has stressed in the past that Sony must maximize its stock price and market capitalization, but has never given his view on how much the electronic giant's stock should be worth in the five years since he took its helm.
``Sony shares were already down by their daily limit and couldn't be sold much further,' said Hirokuni Matsumoto, a trader at Yamatane Securities. ``Instead the 'Sony shock' news hurt other stocks in the sector...and the overall index.'
Fujitsu fell 8.75 percent to 3,860 yen while Hitachi Ltd dropped 5.02 percent to 1,496 yen. Internet investor Softbank T) , until recently a market darling alongside Sony, ended down its daily limit of 5,000 yen or 5.77 percent at 81.600.
And Japan's benchmark Nikkei index tumbled 374.28 points or 2.02 percent to close at 18,168.27, dragged by the tech stocks.
Last September, Microsoft Corp's president Steven Ballmer put cold water on his own company's shares by saying the valuations on the company and other technology stocks have reached ``absurd' levels.
But the warning from Idei was the first from a top Japanese infotech firm representing the so-called ``New Japan' stocks that have pulled Tokyo's market higher in recent months.
Sony executives have occasionally bucked the quiet conformity of corporate Japan. In April 1998, Chairman Norio Ohga triggered a fall in the Japanese currency when he warned that the nation's economy was ``on the verge of collapsing.'
ANALYSTS STILL CONFIDENT OF SONY'S LONG-TERM POTENTIAL
While analysts agree Sony shares are overvalued, they add that a market recovery would immediately restore impetus to Sony, given its potential strength in the Internet age, strong brand image, rich content, and relatively clear network age strategy.
Despite the fall, Sony's stock trades at sky-high multiples of its earnings -- a huge 120 times per-share earnings (PER) -- an incredible figure given the fact that its PER in the past 20 years up to last October averaged a meager 23.
The strong rally came despite negative profit prospects through 2002 because of massive launch costs of its PlayStation II game console, due this March, and the rising yen.
The huge consumer electronics and entertainment group relies mostly on manufacturing of the PlayStation gaming console and electronics products for profits.
In its latest push into the Internet market, Sony unveiled a ``Network Walkman' and other Internet music and personal TV devices in Las Vegas overnight.