Bloomberg News

Sony Profit Forecast Misses Estimates as TVs Sales Sink

May 10, 2012

Kazuo Hirai, president and chief executive officer of Sony Corp., center, leaves a group photo session with the company's executives at a news conference in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

Kazuo Hirai, president and chief executive officer of Sony Corp., center, leaves a group photo session with the company's executives at a news conference in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

Sony Corp. (6758), cutting 10,000 jobs after four straight years of losses, forecast a profit that was less than half of what analysts estimated as TV and PlayStation 3 sales slump.

Net income in the year ending March 31 may be 30 billion yen ($377 million), the Tokyo-based maker of Bravia TVs and Cyber-shot cameras said in a statement today. That compared with the 61.4 billion-yen average of 18 analyst estimates compiled by Bloomberg. Sony will lose about 80 billion yen selling TVs, a ninth straight year of losses in that business.

Kazuo Hirai, 51, who took over as chief executive officer last month, is eliminating about 6 percent of the workforce at Japan’s largest electronics exporter after losing customers to Samsung Electronics Co. (005930) and Apple Inc. (AAPL:US) Hirai is turning to mobile devices, games and digital imaging to revive Sony, which has lost about 90 percent of its value since 2000 while failing to deliver trend-setting products like the Walkman.

“It’s still not clear how Sony can post this profit,” said Ichiro Takamatsu, a fund manager at Tokyo-based Bayview Asset Management Co., which manages $2 billion. “It needs something really innovative, but that won’t just pop out all of a sudden.”

Sony predicts selling 17.5 million TVs this year, down from 19.6 million last year, according to the statement. Sales of the PlayStation game consoles may drop to 16 million units from 18 million units. Compact-camera sales will remain little changed at 21 million units.

Sales this year may be 7.4 trillion yen, Sony said, compared with the 6.8 trillion-yen average analysts’ forecast.

Shares Decline

The company’s shares fell 1.2 percent to 1,213 yen in Tokyo, extending the loss this year to 12 percent. Sony U.S. depositary receipts rose 1.1 percent to $15.40 at 12:58 p.m. in New York. Apple rose 0.8 percent to $573.80.

“Sony needs real restructuring, rather than cutting costs on the surface,” said Mitsushige Akino, who oversees about $627 million at Ichiyoshi Investment Management Co. in Tokyo. “Sony’s position globally has dropped a lot and the direction won’t turn positive right away under the current environment.”

The loss in the year ended March 31 was 457 billion yen, lower than the 520 billion yen it predicted last month. Sony’s total liabilities stood at 10.8 trillion yen as of March 31, according to the statement.

Earthquake, Thai Floods

Sony cited recovery from the March 2011 earthquake in Japan and floods in Thailand as the main reason for better operating income in its consumer products division. The natural disasters forced the company to shutter factories and delay new products.

Sony, which lost 856 billion yen combined in the past four years, predicted an operating profit of 180 billion yen for the year that began in April, compared with analysts’ estimates for 166 billion yen.

The company based its full-year earnings on 105 yen to the euro and 80 yen to the dollar. Mobile-phone unit earnings will worsen, Chief Financial Officer Masaru Kato said.

“There are uncertainties over Europe’s outlook and China’s growth,” said Keita Wakabayashi, an analyst at Mito Securities Co. “Whether Sony will be able to get what it expects to get this year still needs to be monitored.”

Hirai, who took over from Howard Stringer, wants to “revitalize and grow” the electronics business under a new management plan unveiled last month. The initiatives include bolstering the digital imaging, games and mobile businesses; turning around the TV division; expanding in emerging markets; creating new businesses and accelerating innovation; and realigning the business portfolio.

TV Sales

The world’s No. 3 TV maker has lost about 700 billion yen in the business during the past eight years while losing market share to Suwon, South Korea-based Samsung and Seoul-based LG Electronics Co., both of which make money selling sets. Sony plans to make the business profitable by March 2014.

Last year, Sony exited a panel-making venture with Samsung, the world’s No. 1 TV maker, to cut costs. Hirai, who has pledged to cut the number of Bravia models by 40 percent, abolished two divisions at Sony’s main electronics unit and put himself in charge of TVs, games and networked entertainment operations.

Global TV shipments last year fell for the first time in six years because of excessive inventory in the U.S. and Europe, and the end of Japanese government subsidies for purchases, according to DisplaySearch, part of NPD Group. Shipments fell 0.3 percent to 247.7 million units, the researcher said.

Sony Versus Apple

Sony is increasing its offerings in the game business. The company began selling the PlayStation Vita in December to lure consumers increasingly turning to iPhones and iPads for entertainment. The Vita is the first major overhaul of the handheld since the PlayStation Portable went on sale in 2004.

Sony plans to boost sales of portable game players, including PS Vita, to 16 million units this fiscal year from 6.8 million a year earlier, according to the statement.

Last year, Sony started selling tablet computers in an attempt to take on Cupertino, California-based Apple’s iPads. The Japanese company also bought out partner Ericsson AB’s stake in their mobile-phone venture to challenge Samsung in phones.

Sales of smartphones will probably rise to 33.3 million units this year from 22.5 million a year earlier, the company said.

Samsung, Asia’s largest consumer-electronics maker, last month reported a better-than-estimated quarterly profit on surging sales of Galaxy smartphones. Sony controlled 4.2 percent of the smartphone market last year, while Apple had 18.9 percent and Samsung 18.5 percent, according to researcher Gartner Inc.

“Sony can’t get out of the business model that can’t generate profits due to competition,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo. “All Sony is doing is trying to stop the bleeding.”

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net.

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net.


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