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Sony Warns of $1.1 billion Loss This Year

November 2, 2011 Written by Sebastian Moss

Once the king of the electronics industry, Sony has seen its profits tumble as various parts of the vast company underperformed or became unprofitable while more and more competitors ate up market share. Unfortunately, it has been another tough year for the Japanese giant, with the company set to lose money for the fourth year in a row.

The main reason for the huge loss is down to the ailing TV business, which is expected to have lost Sony ¥175 billion yen ($2.2 billion) this fiscal year – the eighth straight year the TV business has been in the red. At a press conference in Tokyo, Executive Deputy President Kaz Hirai, who used to be the head of PlayStation but is now expected to replace Sony’s CEO Howard Stringer said:

After losing money [in televisions] for seven straight years, this is something that our entire management feels is a grave situation. This is a problem not just for the television group, but it is something for the entire Sony group to tackle together.

In the restructure of the TV business, Sony expects to lose another billion dollars next fiscal year, before finally returning to profit in the year ending March 2014. While Sony’s TV business suffered from entering the LCD market late, the industry as a whole is suffering from rampant price cutting to attract customers who don’t fully understand the differences between various HDTVs, and so are only swayed by the price. Sony, however, is in talks with Samsung over their LCD-panel joint venture, something that could reduce costs.

Shigeo Sugawara, senior investment manager at Sompo Japan Nipponkoa Asset Management, which owns Sony shares, said:

I am surprised at the extent of the losses and I was anticipating TV restructuring, so I feel let down on both counts. We were focused on what would happen to Sony’s TV division, but I don’t see any drastic restructuring steps, in fact I can’t even see any signs they’ve begun to cut.

Jeff Yeh, chief investment officer of Taiwan-based Capital Investment Trust’s overseas portfolios, which has $1 billion of client assets added:

Sony has not done enough to rescue its TV business. It took them 15 years to become an electronics giant, but it only took them the last five years to plunge to where they are.

He continued, saying he would not buy Sony shares in the near future.

Another problem for Sony has been the strength of the yen, especially against the increasingly weakening euro. Sony mostly managed to offset the yen’s rise against the dollar by procuring parts in the U.S. currency, but has had difficulty doing the same with the euro. Chief Financial Officer Masaru Kato said:

When the foreign-exchange rates move so suddenly, it’s hard for us to adjust.

The earthquake in Japan, the flooding in Thailand and the hack of the PSN are also reasons for the loss, with the floods causing parts shortages and delays in new-product introductions.

For the September quarter, Sony shipped 3.7 m PS3s, 1.7m PSPs, and 1.2m PS2s, meaning that the PS3 has shipped 55.5m units in total.