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Sony warns of worst ever loss

Apr 10 2012 11:35

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Sony to axe 10 000 jobs globally

Tokyo - Sony forecast a record $6.4bn net loss for the business year just ended, double earlier forecasts and a fourth straight year of losses, inflated by writing off deferred tax assets in the United States.

In a bid to ease investor concerns over its deteriorating bottom line, the Japanese consumer electronics giant said it would bounce back this year and make an operating profit of ¥180bn.

Sony, which plans to axe 10 000 jobs - about 6% of its global workforce - according to media reports this week, has been hammered by weak demand for its televisions and been overtaken by more innovative gadget rivals such as Apple and Samsung Electronics.

Kazuo Hirai, who took over as CEO this month, has said he is prepared to take "painful steps" to revive the company and would not hesitate to scale back or withdraw from businesses if they were not competitive.

The Sony veteran, known for reviving the PlayStation gaming operations through aggressive cost-cutting, has promised to get the struggling TV business - which has lost $10bn alone in 10 years - back on its feet within two years.

Sony forecast a ¥520bn ($6.4bn) net loss for the year to end-March 2012. In February it had forecast an annual net loss of ¥220bn. The additional loss is from write-offs of tax credits in the United States, which the company cannot use because of the losses it has racked up.

Analysts had forecast a full-year loss of ¥214bn, according to Thomson Reuters I/B/E/S.

"To bring Sony back, Hirai needs to develop personnel and platforms that create competitive and innovative products, but that will be a formative task after a lot of talent left under early retirement plans," said Tetsuru Ii, president of Commons Asset Management, who oversees about ¥2.7bn worth of assets and does not hold a stake in Sony.

"The old Sony culture would only allow it to make things that were the best globally. Under that logic, does it make sense for Sony to continue its TV business, when it's not even the market leader in Japan?

"In terms of management philosophy, (Hirai) will have to choose and focus the company's business activities."

Rekindling the flame?

Some analysts believe Hirai, a fluent English speaker, can rekindle the Sony flame, saying he has a good grasp of the business and is likely to know how to break down its silos and integrate its divisions.

A key concept in Hirai's strategy hinges on merging Sony's robust roster of entertainment properties - including singers Kelly Clarkson and Michael Jackson, and the Spider-Man and Men in Black film franchises - with its Vaio, Bravia and other electronics brands in an effort to boost sales.

He has said the TV business would be crucial to this "convergence" strategy, brushing aside suggestions it may need to pull out of the market.

Recently, Sony exited an LCD panel venture with Samsung, enabling it to obtain screens for its TVs more cheaply. It also agreed to buy out Ericsson's half of their smartphone venture for $1.5bn to shore up its position in a market where Apple and Samsung have become leaders.

Hirai, who was promoted from head of Sony's consumer products and services businesses that produce the bulk of Sony's $85bn in annual sales, has also singled out medical as a potential core business for the future.
sony corp



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