Tags: Sony | Loss | Forecast | Disasters

Sony Doubles Annual Net Loss Forecast Amid Weak TV Sales, Strong Yen, Natural Disasters

Thursday, 02 Feb 2012 12:40 PM

Hammered by weak TV sales, a strong yen and production disruptions from flooding in Thailand, Sony Corp. on Thursday reported a net loss of 159 billion yen ($2.1 billion) for the October-December quarter and more than doubled its projected loss for the full fiscal year.

That would be Sony's fourth year of red ink — a daunting starting point for incoming CEO and President Kazuo Hirai, who at 51 will become Sony's youngest chief executive when he takes over in April from Welsh-born Howard Stringer.

"Sony must steer a new course," said Hirai, who leads the core consumer products business, at a packed news conference a day after he was named to the CEO post. "We will need to make many painful decisions and execute them, but I believe these are unavoidable for Sony's future."

Sony, whose businesses sprawl from cameras and cellphones to PlayStation game consoles and movies like "The Smurfs," has for years been struggling to regain the swagger and creative flair that made it a dominant force in the global electronics industry in the 1980s and early 1990s.

On Thursday, it predicted a net loss of 220 billion yen ($2.9 billion) for the year through March, much bigger than an earlier forecast of 90 billion yen.

Hirai, who led Sony's gaming division earlier in his career, was groomed to replace Stringer, who will retain his post as chairman of Sony until June, after which he will become chairman of the board, a position less involved in daily corporate operations.

"Now more than ever it's time to bring about generational change," Stringer said. "Change is good, it is healthy, and in this hyperconnected world, it is essential."

"Kaz has the right combination of personal qualities, tough-mindedness and leadership skills to lead Sony," he added.

Stringer, who led Sony since 2005, said he began thinking about his successor in 2009, when he named Hirai and a few other young executives to a new management team.

"Why now? Because he's ready," Stringer said. "We need him in charge as we redouble our efforts of recovery."

A key priority for Hirai, currently executive deputy president, will be turning around Sony's money-losing TV business — battered by competition from South Korea's Samsung Electronics Inc. and others.

Hirai also must guide Sony as it faces increasingly intense competition in the gaming sector from Apple Inc.'s iPod and iPhone and Nintendo Inc.'s DS handheld. Sony is hopeful about its new PlayStation Vita, which went on sale in Japan in December and is to be released in the U.S. and Europe later this month.

Hirai outlined some of his strategic goals in spurring a recovery, which included a commitment to reviving the TV business, strengthening the company's cellphone business, spurring innovation and pushing into the field of medical technology.

Hirai defended his commitment to the TV business, which is projected to lose money for the eighth straight year.

"At home, the TV plays a central role," he said. "Various products can be enjoyed on TV, so it is strategically important, and we cannot withdraw from this business."

Natural disasters at home — the March 11 earthquake and tsunami, which disrupted production — and abroad — flooding in Thailand, where two of Sony's factories had to be shut down — also took a toll on the company's business over the past year.

"There is no question 2011 was one of the most trying periods in Sony history," Stringer said.

Sony's forecast of a larger annual loss also stemmed from two temporary factors linked to Sony's withdrawal from two joint ventures. One was Sony's sale of its stake in S-LCD, a liquid crystal display joint venture with Samsung, which resulted in an impairment loss of 63.4 billion yen. Another was Sony's decision to take full ownership of cellphone maker Sony Ericsson, which led to a 33 billion yen charge on valuation allowance on deferred tax assets.

The yen's strength against the dollar and euro, which erodes income when repatriated back to Japan, has also hurt Sony.

Quarterly sales fell 17.4 percent to 1.82 trillion yen, the company said.

Stringer acknowledged that Sony, "like much of Japan, is in real difficulty." But he suggested it would be unwise to bet against the company, as it had weathered the global financial crisis of 2008 and other setbacks.

"We have bounced back twice, and don't bet against us bouncing back again," he said. "It would be very nice if there were not earthquakes, no floods, no hackers, no anything, but on our own skills we can get the company back."

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Thursday, 02 Feb 2012 12:40 PM
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