DJIA 8963.73 -150.71 (-1.65%) S&P 500 1094.02 -16.45 (-1.48%) Nasdaq 1778.09 -26.91 (-1.49%) Value Line Index 952.13 -13.35 (-1.38%) 30-Year Bond 104 +27/32 5.84 Yield
Cable TV company Jones Intercable <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JOINA)") else Response.Write("(Nasdaq: JOINA)") end if %> rose $1 1/4 to $20 1/16 after Philadelphia-based cable provider Comcast Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMCSA)") else Response.Write("(Nasdaq: CMCSA)") end if %> agreed to acquire a stake in the firm, with an option to acquire a controlling interest. Under the deal, Comcast will pay Bell Canada parent BCE Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BCE)") else Response.Write("(NYSE: BCE)") end if %> $400 million for 6.4 million Jones shares and a 49% interest in BCE units owning additional Jones shares. Comcast expects to exercise a $100 million option for the remaining shares held by the BCE units and for shares owned by Jones founder Glenn Jones in December 2001. All told, the transactions would give Comcast a 37% equity stake and a 47% voting stake in Jones. Comcast chairman Ralph Roberts told CNBC that the deal gives Comcast a "very major imprint" in the Washington, D.C.-Baltimore market, as the company looks to shore up market share in its home base on the East Coast.
T R Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROSE)") else Response.Write("(Nasdaq: ROSE)") end if %>, the holding company of Garden City, N.Y.-based Roosevelt Savings Bank, jumped $5 to $43 5/8 after agreeing to merge with Roslyn Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RSLN)") else Response.Write("(Nasdaq: RSLN)") end if %> in a stock swap valued at $1.1 billion. Under the deal, each T R Financial share will be converted into 2.05 shares of Roslyn common stock. The purchase price values T R Financial at $56.63 per share, or a 47% premium to its closing price of $38 5/8 per share on Friday. Roslyn chairman and CEO John Mancino said the deal will increase fiscal 1999 earnings by 9.2%. Also, he expects that the combined company's return on average equity will climb to 11.2% by the end of 1999 from Roslyn's current level of 7.7%. Roslyn fell $4 1/16 to $23 9/16 on the news.
QUICK TAKES: Number 2 U.S. automaker Ford Motor Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %> motored $1 higher to $52 on reports Japanese car maker Mazda Motor Corp. expects to report its first annual profit in six years this year. Ford owns a 33.4% stake in Mazda... Global Motorsport Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSTM)") else Response.Write("(Nasdaq: CSTM)") end if %> added $15/16 to $21 7/16 after the maker of aftermarket parts for Harley-Davidson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HDI)") else Response.Write("(NYSE: HDI)") end if %> motorcycles agreed to be acquired by privately held equity fund Freemont Partners for $124 million in cash, or $23 per share. The Freemont offer trumps an $18 per share offer submitted in March by privately owned Golden Cycle LLC... Kent Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KNT)") else Response.Write("(NYSE: KNT)") end if %> gained $1 3/4 to $22 after CEO Morrie Abramson told Barron's that he wouldn't "quarrel" with analysts' fiscal 1999 earnings estimates of between $1.10 and $1.20 per share.
Airline stocks gained after a very busy Memorial Day weekend. Last week, the Air Transport Association was expecting more than 12.5 million passengers to take to the sky over the three-day weekend. American Airlines parent AMR Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMR)") else Response.Write("(NYSE: AMR)") end if %> rose $1 15/16 to $152 3/8, Delta Air Lines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAL)") else Response.Write("(NYSE: DAL)") end if %> moved up $1 11/16 to $114 15/16, and Trans World Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: TWA)") else Response.Write("(AMEX: TWA)") end if %> advanced $3/8 to $10... Baked goods distributor Earthgrains Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EGR)") else Response.Write("(NYSE: EGR)") end if %> rose $1 9/16 to $52 7/8 after setting a two-for-one stock split, payable July 20... Specialty chemicals firm Great Lakes Chemical Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLK)") else Response.Write("(NYSE: GLK)") end if %> climbed $1 1/2 to $42 1/16 after completing the spin-off of its gasoline octane compound unit Octel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OTL)") else Response.Write("(NYSE: OTL)") end if %>... Liquid and gas filtration products maker CUNO Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CUNO)") else Response.Write("(Nasdaq: CUNO)") end if %> was lifted $15/16 to $20 after CIBC Oppenheimer started coverage of the company with a "strong buy" rating.
Ontrack Data International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ONDI)") else Response.Write("(Nasdaq: ONDI)") end if %> tacked on $1 1/16 to $13 1/8 after NationsBanc Montgomery Securities upgraded the utility software company to "buy" from "hold"... TV station operator Hearst-Argyle Television <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HATV)") else Response.Write("(Nasdaq: HATV)") end if %> rose $11/16 to $34 15/16 after agreeing to buy nine broadcast TV stations and five radio stations from Pulitzer Publishing Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PTZ)") else Response.Write("(NYSE: PTZ)") end if %> for roughly $1.85 billion in stock and assumed debt. Pulitzer also said it will spin off its newspaper publishing unit to its shareholders, forming a new company to be called Pulitzer Inc... Vlasic Foods International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VL)") else Response.Write("(NYSE: VL)") end if %> picked up $1 3/8 to $20 15/16 after the maker of pickles and Swanson frozen dinners was upgraded to "buy" from "hold" by Prudential Securities. Separately, the Wall Street Journal said the firm plans to increase annual marketing expenditures for its pickles to $15 million.
Engineered Support Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EASI)") else Response.Write("(Nasdaq: EASI)") end if %> tacked on $1 3/8 to $28 7/8 after the maker of military ground support equipment set a three-for-two stock split payable on June 26... The American depositary shares of Corporacion Bancaria de Espana <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AGR)") else Response.Write("(NYSE: AGR)") end if %> rose $1 13/16 to $42 9/16 after the Spanish bank (also known as Argentaria S.A.) said it may split its Spanish shares four-for-one and issue one "bonus" share for each two shares owned by shareholders... Biopharmaceutical firm Centocor Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CNTO)") else Response.Write("(Nasdaq: CNTO)") end if %> moved up $1 7/8 to $39 1/8 after Lehman Brothers analyst Anthony Butler reiterated his "buy" rating on the stock on the belief its Avakine drug for Crohn's disease will be recommended for approval by an FDA panel this week... Crown Crafts <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CRW)") else Response.Write("(NYSE: CRW)") end if %> tacked on $13/16 to $14 1/4 after Wheat First Union upgraded the maker of bed and window coverings to "buy" from "outperform."
Modeling and computer design products maker 3D Systems Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TDSC)") else Response.Write("(Nasdaq: TDSC)") end if %> gained $15/16 to $10 7/16 after signing a patent cross-license agreement with Japanese electronics giant Sony Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SNE)") else Response.Write("(NYSE: SNE)") end if %> relating to the production and marketing of stereolithography machines... Computer disk drive maker Quantum Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QNTM)") else Response.Write("(Nasdaq: QNTM)") end if %> sped ahead $1 1/8 to $22 3/8 after Hewlett-Packard <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> said it would use Quantum's Viking II series of hard disk drives for its NetServer LH 3 server product... Integrated circuit design software firm Avant! Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVNT)") else Response.Write("(Nasdaq: AVNT)") end if %> added $4 5/16 to $28 after a federal judge delayed a copyright infringement lawsuit brought by Cadence Design Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CDN)") else Response.Write("(NYSE: CDN)") end if %> until a criminal trial involving Avant! executives is completed. The judge also refused to expand an injunction against Avant!'s ArcCell software to include its Aquarius products... Intuit Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTU)") else Response.Write("(Nasdaq: INTU)") end if %> moved up $1 7/16 to $50 after Deutsche Morgan Grenfell resumed coverage of the maker of Quicken and TurboTax financial software with a "buy" rating.
Diversified manufacturing and service company Tyco International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TYC)") else Response.Write("(NYSE: TYC)") end if %> fell $1 15/16 to $53 3/4 after announcing it will acquire U.S. Surgical <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USS)") else Response.Write("(NYSE: USS)") end if %>, which specializes in making minimally invasive medical products, for $3.3 billion, or $42.50 a share, in stock. U.S. Surgical shareholders will receive 0.7606 shares of Tyco stock for each USS share. Tyco expects the deal will add about $0.12 a share to earnings in the first year, $0.20 the second year, and $0.25 in the third. Already the world leader in security and fire protection systems, Tyco will now become one of the largest manufacturers of disposable medical products with $4.5 billion in medical product sales a year as well as total annual revenue in excess of $15 billion. Tyco has been on a shopping spree, making 80 acquisitions in the last five years to broaden its product offerings and customer base. Just last Friday the company announced the cash purchase of a majority stake in electronic security services and equipment provider CIPE SA of France. In April, it said it would buy the Wells Fargo Alarm business of Borg-Warner Security <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BOR)") else Response.Write("(NYSE: BOR)") end if %> for $425 million in cash, as well as hygiene products maker CONFAB. After this spate of deals, the company said it plans to make smaller acquisitions in the next 12 to 15 months.
Utility software developer Symantec <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYMC)") else Response.Write("(Nasdaq: SYMC)") end if %> sank $3 3/16 to $24 1/4 after rival Dr. Solomon's Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SOLLY)") else Response.Write("(Nasdaq: SOLLY)") end if %> announced an aggressive offer to all IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> antivirus license customers to switch to Dr. Solomon's products free of charge. The announcement comes one week after IBM and Symantec said they would join forces to deliver a single family of antivirus products. London-based Dr. Solomon's argues that IBM has "signaled their effective withdrawal" from the antivirus market, and existing customers are being "abandoned" and "forced" to change their antivirus software, which may leave them "vulnerable to attacks from new kinds of viruses" during the transition. The collaboration will allow Symantec to combine IBM antivirus technology with its own to make a range of products, and, more importantly, Symantec will get IBM's existing antivirus contracts. If Dr. Solomon's scare tactics work, however, they could undermine what is otherwise a major coup and a sweet deal with IBM.
QUICK CUTS: Netscape Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> fell $1 to $23 7/8 in advance of reporting its Q2 earnings after the closing bell. The Internet and computer software company posted a breakeven quarter, compared with a profit of $0.08 last year, beating analysts' expectations of a loss of $0.10. Netscape competitors also declined today, with America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> dipping $1 7/8 to $82 3/4, Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> sinking $6 1/8 to $108 1/4, Infoseek <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEEK)") else Response.Write("(Nasdaq: SEEK)") end if %> dropping $3 5/8 to $22 3/8, Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> losing $6 1/2 to $52 7/8, and Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> falling $6 7/16 to $50 3/8... Walt Disney <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> dropped another $4 9/16 to $111 3/4 in the wake of several downgrades and investor worry over the high price the entertainment company is paying for the rights to air NFL games on ABC and ESPN.
CBS Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CBS)") else Response.Write("(NYSE: CBS)") end if %> shed $1 9/16 to $30 5/8 as the media company announced it will sell its Westinghouse Process Control Division to Emerson Electric <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EMR)") else Response.Write("(NYSE: EMR)") end if %> for $265 million in cash and assumption of pension and other liabilities associated with the business... Pharmaceutical company Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> lost another $2 1/4 to $103 3/16 following the FDA's announcement that six people have died after taking the impotence drug Viagra. Last week the company reiterated the danger of taking nitrates used to treat chest pain after taking Viagra... Apple Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AAPL)") else Response.Write("(Nasdaq: AAPL)") end if %> was down $1 3/16 to $26 11/16 after Taiwan-based Umax Data Systems said it has lost $1.1-$1.2 billion New Taiwanese dollars making Apple clones and has virtually stopped production of the computers.
Communications satellite maker Loral Space and Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOR)") else Response.Write("(NYSE: LOR)") end if %> continued its decline today. Loral shares slid $2 1/2 to $25 3/8 as Congress pursued its investigation into whether the U.S. allowed sensitive missile technology to pass to the Chinese... Amgen <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMGN)") else Response.Write("(Nasdaq: AMGN)") end if %> dropped $4 15/16 to $60 5/8 after Goldman Sachs lowered its rating on the biotechnology company to "market perform" from its "recommend list" based on the stock's valuation. Amgen shares jumped 6% on Friday after Business Week reported that the company may be an acquisition target for DuPont <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DD)") else Response.Write("(NYSE: DD)") end if %>, which also lost $2 15/16 to $79 1/2... At Home Network <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %> skidded $4 to $33 5/8 after announcing a distribution partnership with ComTel, a U.K. cable and telecommunications operator, by which At Home Network will develop a British version of its Internet service.
Card-based transaction systems, security, and service company Diebold Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DBD)") else Response.Write("(NYSE: DBD)") end if %> plunged $8 7/8 to $30 7/8 after announcing that it expects lower Q2 EPS compared with last year, when it earned $0.44. Analysts currently predict EPS of $0.49 to $0.50... Information management products company Wallace Computer Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WCS)") else Response.Write("(NYSE: WCS)") end if %> plummeted $7 1/4 to $27 1/2 after announcing that it expects Q3 basic EPS to be between $0.41 to $0.43 compared with $0.45 for the prior-year period. It also anticipates Q4 basic EPS to be between $0.31 and $0.36, fiscal 1998 basic EPS to be in the range of $1.69 to $1.76, and 1999 results to be in the $1.90 to $2.00 range... Motor carrier Roadway Express <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ROAD)") else Response.Write("(Nasdaq: ROAD)") end if %> stalled for $3 5/8 to $19 1/8 after warning that it expects Q2 earnings will fall 30% to 40% short of the year-ago period because business levels are currently 6% to 7% lower than anticipated.
Wireless communications company Digital Microwave <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DMIC)") else Response.Write("(Nasdaq: DMIC)") end if %> dropped $1 3/16 to $10 after warning that political and economic problems in Asia are "creating additional near-term uncertainty" in the company's financial results. Due to recent U.S. sanctions on financing activities in India, the company expects a slowdown in business there in the near future. In Indonesia, business is also expected to be slow... Desktop publishing products company Adobe Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADBE)") else Response.Write("(Nasdaq: ADBE)") end if %> lost $2 to $41 3/8 after announcing that it has settled a copyright and patent lawsuit against The Learning Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TLC)") else Response.Write("(NYSE: TLC)") end if %>, which has agreed to pay Adobe $2 million in damages, representing profits, interest, and reimbursement for attorney's fees.
Phone company Cincinnati Bell <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CSN)") else Response.Write("(NYSE: CSN)") end if %> dropped $4 to $32 3/8 after warning that it expects Q2 earnings and sales to fall below expectations and that it is looking for ways to cut costs, which could result in a charge later this year... Fund- managing firm CMG Information <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMGI)") else Response.Write("(Nasdaq: CMGI)") end if %> plunged $5 11/16 to $43 1/4 after ditching plans to buy back 1 million shares... Hyperion Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HYSW)") else Response.Write("(Nasdaq: HYSW)") end if %> fell $6 3/4 to $31 3/8 and Arbor Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ARSW)") else Response.Write("(Nasdaq: ARSW)") end if %> sank $8 1/4 to $33 7/8 after the two financial software companies agreed to merge in a deal valued at $798.4 million in stock... 3Dlabs <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TDDDF)") else Response.Write("(Nasdaq: TDDDF)") end if %> plummeted $2 1/8 to $7 1/8 after warning that it anticipates a Q2 loss and that revenue may not top $11 million... Internet marketing company Think New Ideas <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THNKE)") else Response.Write("(Nasdaq: THNKE)") end if %> dropped another $5 11/16 to $18 in the wake of announcing the resignation of CEO and founder Scott Mednick to pursue "philanthropic opportunities."
FOOL
ON THE HILL
An Investment Opinion
by
Jim Surowiecki
Godzilla Not a Monster for Sony
In the normal course of events, news that a company's most highly touted product of the year made an inauspicious debut would send the firm's stock price spiraling downward. But when the company in question is a $50 billion global behemoth named Sony <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SNE)") else Response.Write("(NYSE: SNE)") end if %>, and the product is a $120 million film named Godzilla, you start to realize that size really does matter, and that in the context of Sony's worldwide business, the success or failure of a single movie -- no matter how hyped that movie is -- just isn't that important.
To be sure, that's something of an exaggeration. Godzilla, which was made by the Emmerich-Devlin team that was also responsible for Stargate and Independence Day, ran up $120 million in production costs and another $120 million in global marketing costs, and if it was a true bomb -- along the lines of something like Cutthroat Island, which raked in a whole $5 million at the box office a couple of years ago -- then heads might very well already be rolling at Sony Pictures. But even though Godzilla's take for the Memorial Day weekend was a disappointing $55.5 million, it's still on pace to earn back close to its costs in U.S. ticket receipts alone. Add in overseas sales, video, and cable revenues, and Sony could still end up making money on the giant lizard's back. So the lack of reaction from investors seems completely justified.
Still, even if Godzilla had flopped in a more dramatic fashion, instead of merely disappointing expectations that had been raised to preposterous heights by Sony's dazzling ad campaign for the film, the effect on Sony's bottom line would have been hard to see. Sony does $50 billion a year in sales, and in the last two years has increased revenue by 35%. And while its entertainment assets -- which include Columbia and TriStar Pictures, and Columbia and Epic Records -- generate quite a bit of press coverage, they account for less than a quarter of the company's revenues as a whole, and for a similarly small percentage of Sony's earnings. In that context, the performance of Godzilla matters much less to Sony's future than the market penetration of DVD technology or the popularity of PlayStation video games.
What's interesting about this, though, is that Sony obviously can't simply treat its entertainment assets as irrelevant, even if the few billion dollars a year in revenue they generate is, relatively speaking, not overwhelmingly important. After all, you take a billion here, a billion there, and pretty soon you're talking about real money. As a result, Sony is in the difficult position of ensuring that its entertainment divisions control costs, market intelligently, and make smart product decisions while knowing that each of those choices, on their own, make almost no difference to the company's bottom line at all. It's only when they're added up that they might have an impact. Compounding this problem is the fact that Hollywood remains, true to legend, a culture built on the principle of excess, and, more importantly, that delivering consistently good results year after year is something that no Hollywood studio -- save perhaps Disney <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> has figured out how to do.
Sony Pictures, after all, was struggling badly two years ago, which prompted a major leadership shakeup and rumors of a possible spin-off. But the studio came back strongly last year with a string of hits, including most notably Men in Black, all of which had been greenlighted by the same executives who were responsible for debacles like The Cable Guy. And certainly on the face of it, Godzilla looked like a good investment, insane as that sounds when you're talking about a $120 million film. Buzz on the film has been excellent since last summer, when the first trailers appeared, and the short track record of Emmerich-Devlin was impressive.
The only really questionable decision studio execs made about Godzilla was the decision to open the film on Tuesday night, but that was only a mistake because the movie is a disappointing rip-off of Jurassic Park, which means that word-of-mouth -- at least my word-of-mouth -- has been bad on the film. (The Tuesday opening therefore gave people plenty of time to hear about Godzilla's mediocrity before the weekend.) But it's not as if Sony was going to be able to avoid the word-of-mouth problem for long.
In the end, the entertainment business is less irrational (though it is often that) than it is incredibly difficult. Predicting what kinds of movies will appeal to the fickle public, figuring out how to market those movies successfully, managing costs in a business built on the principle that bigger is better -- these are not exactly enviable tasks. And the kinds of technological and manufacturing advantages that companies like Gillette <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: G)") else Response.Write("(NYSE: G)") end if %>, Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>, and Sony use to dominate their competitors are not really available in the entertainment industry. No one studio is consistently better at making films more efficiently or at using technology more savvily. So the chaos of the consumer marketplace rules.
The irony, then, may be that Sony Pictures is best off where it is, hidden within the bosom of a much larger conglomerate that can reap the benefits of its good years and absorb the costs of its bad ones without too much damage to shareholders. As pure plays, after all, movie studios would seem to be a recipe for disaster. But as part of larger conglomerates -- even with the problems a lack of oversight can bring -- they may make more sense.
In any case, even with the minor Godzilla blip, Sony itself remains a company worth studying very closely. The current recession in Japan has to make investors wary of putting their money into a Japanese company, but Sony is a gem in two different ways. In the first place, it derives most of its revenue from operations outside Japan, and is one of the few companies to have as strong a reputation outside its domestic market as within it. (Sony is, for instance, the most respected brand name in the U.S.) In the second place, Sony has made dramatic revisions to its internal governing structure in recent years, slashing the size of its board from 38 members to 10 and tying the compensation of its executives much more tightly to the company's bottom-line performance. Sony's disclosure of its financials is still dissatisfying, and since shares of the company trade as depositary receipts (ADRs), you can't find a Sony 10-K. But it will be one of the dominant companies in the world of consumer electronics and multimedia for decades to come. And that'll be true even if we don't get five or six Godzilla sequels.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Jim Surowiecki (TMF Cinder), Fool Three Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool
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