Bloomberg News

Sony Dips Below 1,000 Yen for First Time Since 1980: Tokyo Mover

June 04, 2012

Sony Corp. CEO Kazuo Hirai

Kazuo Hirai, president and chief executive officer of Sony Corp. Photographer: Tomohiro Ohsumi/Bloomberg

Sony Corp. (6758) dropped below 1,000 yen in Tokyo trading for the first time since 1980, when the Walkman was new, after Japan’s currency gained and the U.S. added jobs at a slower-than-estimated pace.

The shares fell 1.7 percent to close at 996 yen on the Tokyo Stock Exchange. Sony, which recorded an all-time intraday high of 16,950 yen in March 2000, last closed below 1,000 yen on Aug. 1, 1980, according to data compiled by Bloomberg.

Sony, a trendsetter with the portable cassette player, video camera and first compact-disc player, posted four straight annual losses as it failed to develop more hit products, the yen surged and consumers flocked to devices from Apple Inc. and Samsung Electronics Co. A turnaround plan by new Chief Executive Officer Kazuo Hirai has failed to stem a decline that has the company predicting a ninth year of losses as its TV unit.

“Investors’ concern about Sony’s poor earnings seems to be turning into conviction,” said Takashi Watanabe, an analyst at Goldman Sachs Group Inc. “Even as Sony makes progress in reforming its TV operation, its plans for games and smartphones look optimistic.”

Sony, Japan’s biggest exporter of consumer electronics, extended a 28 percent drop this year amid concerns the U.S. recovery is faltering while growth slows in China and Europe’s debt crisis worsens. U.S. payrolls climbed by 69,000 last month, less than the most-pessimistic forecast in a Bloomberg News survey, Labor Department figures showed June 1 in Washington.

Yen’s Surge

Japan’s currency reached 95.60 against the euro last week, the strongest since Nov. 30, 2000, and touched 77.66 against the U.S. dollar on June 1, the highest since Feb. 14. Sony loses 6 billion yen of annual operating profit and 10 billion yen of sales for every 1 yen decline in the value of the euro, according to Mami Imada, a Sony spokeswoman. A 1-yen decline by the U.S. dollar hurts sales by 50 billion yen, Imada said.

“The yen is significantly stronger than it was a few months ago, when Sony disclosed its turnaround plan,” said Keita Wakabayashi, a Tokyo-based analyst at Mito Securities Co. “If the yen stays as it is, Sony’s reform may get delayed.”

The company is basing its full-year earnings forecasts on exchange rates of 105 yen to the euro and 80 yen to the dollar.

Hirai has presided over a 42 percent decline in Sony’s market value since taking over April 1. The 51-year-old succeeded Howard Stringer after the maker of Bravia TVs posted a record loss last fiscal year, when Japan’s strongest earthquake and floods in Thailand crippled plants, and attacks by hackers disrupted Sony’s online entertainment network.

Record Loss

Sony posted a record 457 billion-yen loss ($5.9 billion) in the year ended March. Its TV business continued losing money amid falling prices and competition from South Korea’s Samsung and LG Electronics Inc.

Worth $125 billion in March 2000, Sony is now valued at less than $13 billion. Cupertino, California-based Apple Inc. (005930) is valued at $525 billion and Suwon, South Korea-based Samsung Electronics Co. at $150 billion.

Sony’s domestic competitors Panasonic Corp., Sharp Corp. and Toshiba Corp. all trade below 1,000 yen.

The declines are symbolic of how Japan’s consumer electronics industry has lost its added value, said Einosuke Yoshino, a fund manager at Commons Asset Management in Tokyo.

“It’s just the result of what Sony has been doing over the past 10 years,” Yoshino said.

Credit Downgrades

Standard & Poor’s cut Sony’s long-term credit rating one level in February to BBB+, the third-lowest investment grade, with a negative outlook, citing “a massive erosion of prices” and “severe competition.” The announcement followed downgrades by Moody’s Investors Service and Fitch Ratings.

Sony’s liabilities totaled 10.8 trillion yen as of March 31, 8 percent higher than a year earlier, while its total equity dropped 15 percent to 2.5 trillion yen during the year, data compiled by Bloomberg show.

Hirai has promised to reform Sony by cutting 10,000 jobs, selling a chemical unit and streamlining TV operations. He said he’ll consider alliances for the company’s battery unit. The CEO, who earned a reputation for turning around the PlayStation game unit, is counting on digital cameras, games and mobile gadgets to help drive a revival, he said April 12.

First CD Player

Founded in Tokyo in 1946 by Akio Morita and Masaru Ibuka, Sony created Japan’s first transistor radio and the world’s first CD player. The inventor of the Trinitron cathode-ray tube TV won admirers including Apple founder Steve Jobs.

Sony shares were traded at 850 yen in July 1979, when the company introduced the Walkman. The stock rose to 1,691 yen in October 1982, when Sony started offering the first CD player, and to 3,477 yen when it introduced Handycam video recorders in 1989.

The stock slid to the lowest since August 1980 on May 12 after forecasting earnings that missed analyst estimates.

The company projected net income may total 30 billion yen in the year started April 1, the company said in May. That compared with the 61.4 billion-yen average of 18 analyst estimates compiled by Bloomberg.

The world’s No. 3 TV maker said it may lose about 80 billion yen selling models as it predicted sales will decline 11 percent to 17.5 million units. Sony plans to make the business profitable by March 2014.

Global TV shipments fell for the first time since 2004 last year, according to DisplaySearch, part of NPD Group. Flat-screen TV shipments in the U.S. may fall for the first time this year, to 37.1 million units from 39.1 million the year before, according to IHS Inc.’s iSuppli.

TV Sales

Sony still forecasts revenue to rise 14 percent to 7.4 trillion yen this fiscal year, helped by smartphones and portable game players. Smartphone sales may rise to 33.3 million units from 22.5 million and handheld game players including PlayStation Vita may more than double to 16 million units from 6.8 million, the company said May 10.

In an attempt to catch up with Samsung, Apple and Research In Motion Ltd. (RIM) in the expanding smartphone market, Sony bought out partner Ericsson AB’s stake in their mobile-phone partnership last year.

Sony had a 4.2 percent share of the smartphone market last year, lagging behind rivals including Nokia Oyj (NOK1V), HTC Corp., and Research In Motion, according to researcher Gartner Inc. Apple topped the ranking with a 18.9 percent market share, followed by Samsung, controlling 18.5 percent.

The maker of Vaio personal computers unveiled its first tablet computers in 2011, the last among the global top 10 laptop makers to introduce tablets after Apple’s iPad spurred a surge in demand for the devices.

Smartphones

Hirai’s reform plans add to Sony’s four restructuring plans since 1999, which eliminated 66,500 jobs, according to Keita Sanekata, a spokesman for the company. The company had 168,200 employees as of March 2011, down from 189,700 in 2000, data compiled by Bloomberg show.

“Sony is in a vicious circle,” said Hideki Yasuda, an analyst at Ace Securities Co. in Tokyo. “It needs to cut people in order to improve its profitability, but if it does, people with skills will leave the company. Sony’s lost its ability to create excellent products.”

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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