Sony Corp more than doubled its annual loss forecast to ￥220 billion (US$2.9 billion), underscoring the challenge for incoming chief executive officer Kazuo Hirai in reviving Japan’s biggest consumer-electronics exporter.
The company blamed a stronger yen, cuts in production caused by last year’s Thailand floods and the cost of exiting a display-panel venture with Samsung Electronics Co for raising its November forecast for losing ￥90 billion. The loss in the 12 months ending next month will be the fourth in a row, a first since the Tokyo-based company was listed in 1958.
Sony, which yesterday named Hirai to replace Howard Stringer starting on April 1, cut sales targets for cameras, personal computers and PlayStation 3 game consoles, and said its mobile-phone unit performed worse than expected. The company posted a third-quarter net loss of ￥159 billion, compared with the ￥43 billion average loss of four analysts’ estimates compiled by Bloomberg.
“Sony is a very weak company,” said Edwin Merner, president of Atlantis Investment Research in Tokyo, who manages US$300 million and does not hold Sony shares. “To turn around at this time will be very, very difficult. As they go downhill, they pick up speed.”
It maintained its target for selling 20 million televisions, though the business may lose between ￥220 billion and ￥230 billion, including the cost of exiting the venture with Samsung, chief financial officer Masaru Kato said yesterday. That -compares with a November forecast for a ￥175 billion loss and adds to the ￥480 billion in losses since 2004.
Sony, maker of the Bravia model, has lost ground to Samsung and LG Electronics Inc, both of which sell TVs profitably. Sony and fellow Japanese television makers Sharp Corp and Panasonic Corp have been crippled by the strengthening yen, which forced Sharp to predict a record US$3.8 billion loss yesterday.
Sony dropped 2.6 percent to close at ￥1,328 in Tokyo trading yesterday, before the announcement. The stock has plunged 53 percent in the past 12 months, compared with an 18 percent drop for the broader TOPIX. Sony slid by more than 60 percent since Stringer, 69, took the helm in June 2005.
Hirai, 51, will succeed Stringer, who will become chairman of the board after a shareholders meeting in June, the company said in a statement on Wednesday. Hirai, who worked in the company’s music and entertainment divisions, established his reputation by turning around the PlayStation unit and edged out three other candidates with engineering backgrounds for the top job.
The company yesterday cut sales targets for the PlayStation 3 to 14 million units from 15 million. Hirai said recently the PlayStation 3 would have a 10-year lifespan, suggesting the five-year-old player will not be replaced soon.
Sony also cut its sales target for cameras to 21 million units from 23 million and reduced its forecast for personal-computer sales to 8.4 million from 9.4 million. Camcorder and Blu-ray disc sales also should be lower than projected, the company said.
The impact from Thailand’s worst floods in 70 years is estimated at ￥45 billion, while the appreciating yen will hurt profit by as much as ￥20 billion, Kato said. An appreciating yen damps the repatriated value of Sony’s overseas sales, while a weakening won inflates Samsung and LG.
Sony’s rating was cut by Moody’s Investors Service last month and Fitch Ratings in December, with both citing the difficulty of turning around the TV operations. Moody’s, which assigned a negative outlook to Sony, also downgraded Panasonic Corp’s rating.
Sony has unveiled new tablets, cameras and handheld game players to take on Apple Inc and try to revive profit. It also bought out partner Ericsson AB’s stake in their mobile-phone partnership.
In December, Sony introduced its latest handheld device, the PlayStation Vita, in Japan. Sales reached 500,000 units during the first three weeks, Hirai said last month. The product will be offered in the Americas and Europe starting on Feb. 22.
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