Sony warns of £2.1 billion loss
TOKYO (Reuters) - Sony warned it would post a record $2.9 billion (2.1 billion pound) annual operating loss due to sliding demand and a stronger yen, and unveiled fresh restructuring steps to revive its ailing electronics operations.
The operating loss will be Sony's first in 14 years, underscoring deepening troubles for a company that has fallen behind Apple's iPod in portable music, Nintendo in videogames, and is losing money on flat TVs.
Sony said it now expects an operating loss of 260 billion yen (2.1 billion pounds) for the year to March, down from an earlier projection for a 200 billion yen profit and far worse than earlier media estimates of a loss of 100 billion yen.
The maker of Bravia LCD TVs and PlayStation game consoles said it would beef up a restructuring plan outlined last month, more than doubling a cost-cutting target for the year to March 2010 to 250 billion yen.
Sony, however, plans to keep investing aggressively in strategic fields such as the development of auto-use batteries, a promising area as the use of hybrid and electric vehicles grows.
"While these are extremely challenging times, we must be fully prepared to embrace the opportunities that await us once these dark economic clouds begin to part," Sony Chief Executive Howard Stringer told a news conference on Thursday.
Last month Sony outlined a restructuring plan that included curbing investment, closing five to six plants and cutting a total of 16,000 regular and contract jobs globally to save 100 billion yen a year in costs.
Sony said it would end TV production and design at one plant in Japan and consolidate those operations into another factory, while cutting headcount by 30 percent in operations related to TV design worldwide.
Turning around its loss-making LCD TV operations is high on Stringer's priority as the TV and video game businesses have been major drags to Sony's overall profitability in recent years.
"We simply have no alternative but to dramatically change the fundamental ways we view our business as well as the way we create, manufacture and distribute our products," Stringer said.
It expects restructuring charges to total 170 billion yen through the year to March 2010.
But Sony's management faced criticism from analysts who said more drastic measures were needed to streamline a sprawling empire that includes semiconductors, movies and insurance.
"Sony has to consider ways to lower fixed costs not only for its TV business but for the whole company. It will have to start cutting development costs in addition to production costs," said Nomura Securities senior analyst Eiichi Katayama.
Sony attributed 340 billion yen of the 460 billion yen swing in its operating forecast to its core electronics division, as the slowing global economy depresses demand for its digital cameras, video recorders and flat TVs.
The firm cut its LCD TV sales estimate for the year to March by six percent to 15 million units, while lowering its compact digital camera sales target by 10 percent to 21.5 million units.
The Tokyo-based company has also been hurt by the slide in the Japanese stock market, which sliced into the value of securities held by its financial unit.
Sony is not the only electronics maker suffering.
Rival Samsung Electronics this month reorganised itself into two major groups in response to the global downturn, while Panasonic has also cut its outlook and stepped up restructuring measures.
Sony shares closed down 2.6 percent at 1,938 yen ahead of the revision, underperforming the Nikkei's 1.9 percent rise.
(Additional reporting by Elaine Lies, Taiga Uranaka, Nathan Layne and Ted Kerr; Editing by Michael Watson)
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