Sony: What a mess!

Sony Corp is likely to lose a staggering $1 billion this year, which will maintain a terrible four-year record of losses under CEO Sir Howard Stringer.

A Tokyo press conference outlined how the giant electronics-to-movies plans to trim some 125 billion Yen ($1.6bn) from annual costs over the next few years. This further bad news comes after earlier guidance that it would turn in a 30 billion Yen profit this year.

The challenge is not just for Sony, given that Japan’s other electronics giant, Panasonic, is in a similar position, with Panasonic reporting that it is likely to suffer its worst trading year for the past decade.

Sony’s Executive Deputy President Kaz Hirai told analysts that it was time for a more realistic and analytical approach to cutting losses. “After losing money (in its Bravia televisions) for seven straight years, this is something that our entire management feels is a grave situation,” Hirai said. “This is a problem not just for the television group, but it is something for the entire Sony group to tackle together.”

The company has a ‘four-screen’ strategy of offering network services on mobile phones, tablet computers, personal computers and televisions, but a high-value Yen, and flat equipment sales – especially in the US – have hurt Sony badly.

Hirai appears to have been given the challenge of curing the problems at Sony’s TV business, the cause of most of the problems. He previously worked at Sony’s console games division. His options seem to be to exit the TV business altogether, or else to engineer a closer working relationship with South Korea’s Samsung and boost the importance of the pair’s joint-venture in LCD production.

The Thai floods have not helped, knocking 25 billion Yen off this year’s numbers and in likely factory repair costs. Sony’s already announced job losses of some 17,000 workers is to be accelerated.

Sony’s movie division reported profits of Yen 20.6bn during the quarter, a much brighter position compared with last year’s loss of 4.8 billion Yen. However, this ‘profit’ was helped hugely by a one-off income source of 21.4 billion Yen by selling the merchandising rights to the Spider Man film franchise. Without this the division would have lost money.

Sony’s US stock price fell 7 per cent on November 2nd, to $18.36 a share.

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