Home/ Companies / Sony forecasts $1.1 billion loss as Hirai’s revival falters

Tokyo: Sony Corp. unexpectedly forecast a $1.1 billion annual loss and will cut 5,000 more jobs as chief executive officer (CEO) Kazuo Hirai widens his restructuring plan in the face of shrinking demand for TVs and computers.

The net loss will total 110 billion yen in the 12 months ending 31 March, the Tokyo-based company said in a statement on Thursday, scrapping its revised October projection of a 30 billion-yen profit. Sony will sell its personal computer business and split its TV division into a separate, wholly owned unit after saying it will lose money for a 10th straight year.

Declining sales of key products are hampering Hirai’s revival efforts as the company struggles to find new hits that will attract consumers shifting to mobile devices from Apple Inc. and Samsung Electronics Co. The CEO already failed to meet his pledge to end TV losses after cutting at least 10,000 jobs previously and focusing the company on mobile devices, games and imaging products.

“Hirai lacks aggressiveness," said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “Sony needs to produce a new field for growth in order to increase its value."

Operating income will be 80 billion yen this year, less than half its October forecast of 170 billion yen, while the sales projection is unchanged at 7.7 trillion yen, Sony said.

Sony expects higher full-year earnings in financial services, imaging products, games and music while operating profit will fall in home entertainment and mobile products. The pictures unit will be little changed, it said.

The company cites the costs of restructuring its TV and PC units for the revision to earnings. Sony is taking charges of 70 billion yen this year, an increase of 20 billion yen from its October forecast, it said.

Hirai’s plan

The world’s No. 3 TV maker kept its October sales forecast for 14 million liquid-crystal display sets after cutting it from the 15 million projected 12 months ago. TV operations will lose 25 billion yen this year, the company said.

Sony lowered its sales forecast for Xperia smartphones to 40 million units from an earlier projection of 42 million units. The company rose to No. 3 in global smartphone shipment revenue in the September quarter, according to data compiled by Bloomberg.

A bright spot for the company has been its new PlayStation 4 game console, which sold more than 4.2 million units in the first six weeks after its November release, outpacing competing machines.

At the same time, demand for cameras and camcorders continues shrinking, and the TV business has lost ground in a contracting market to put it further behind South Korea’s Samsung and LG Electronics Inc.

TV revenue

Sony’s share of global TV revenue fell to 7.5% in the third quarter last year from 8.1% the previous quarter, according to NPD DisplaySearch. Sony ranked third, trailing Samsung and LG.

“There’s no prospect of its TV business being profitable," said Makoto Kikuchi, the Tokyo-based chief executive officer for Myojo Asset Management Co. Sony’s strengths are content such as games and movies. It cannot increase profit without moving its focus from TV production to content.

Billionaire Daniel Loeb’s Third Point Llc, which pushed for a spin-off of a portion of Sony’s entertainment unit last year, said in a 21 January letter to investors that Sony needs to restructure its TV and PC businesses.

Quarterly profit

The company also reported third-quarter earnings on Thursday, with net income of 27 billion yen in the three months ended 31 December amid sales of the new PlayStation 4 console and a smaller loss in the unit that makes smartphones.

Sony has been selling assets to generate one-time profit and said last month it began cutting jobs at its Hollywood film studio as part of $250 million in cost reductions.

Since the film unit posted a loss in the September quarter after White House Down flopped at the box office, Sony has found commercial and critical success with American Hustle and Captain Phillips, both of which garnered best-picture nominations at the Academy Awards. This year, Sony will release a sequel to 2012’s The Amazing Spider-Man.

Selling PCs

During the quarter, Sony agreed to sell its Gracenote audio-recognition software business to Tribune Co. for $170 million. It also sold a stake in satellite broadcaster SKY Perfect JSAT Holdings Inc. for 15.2 billion yen.

The company will sell its Japanese PC business to buyout firm Japan Industrial Partners Inc., Sony said on Thursday.

Sony’s long-term credit rating was cut to junk last month by Moody’s Investors Service, which cited the challenges of reviving the TV and PC units. Sony was already rated junk at Fitch Ratings, while Standard and Poor’s rates Sony at the second- lowest investment grade.

Sony rose 1.5% to close at 1,624 yen in Tokyo before the announcement, narrowing its loss this year to 11%.

Sony will start testing an Internet-based pay-television service in the US this year, bringing live and on-demand programming to TVs and its PlayStation consoles, the company said last month. The company also will test a video-game streaming service for the PlayStation, smartphones and TVs. BLOOMBERG

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Updated: 06 Feb 2014, 01:51 PM IST
Next Story
Recommended For You
Get alerts on WhatsApp
Set Preferences My Reads Watchlist Feedback Redeem a Gift Card Logout