January 23, 2009 / 12:51 AM / 10 years ago

Sony shares fall after record loss warning

TOKYO (Reuters) - Shares of Sony Corp tumbled 7 percent on Friday after the electronics and entertainment conglomerate warned of a record annual operating loss and unveiled a more aggressive cost-cutting plan.

Pedestrians are reflected in a window display showcasing a Sony Vaio laptop at an electronics store in Tokyo January 22, 2009. REUTERS/Kim Kyung-Hoon

Sony had said after the close on Thursday that it would post a 260 billion yen ($2.9 billion) operating loss in 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 outlook cut prompted credit rating firm Moody’s to put the consumer electronics maker’s A2 rating under review for possible downgrade, saying it could be hard for Sony to see a recovery in its profitability in the near future under tough market conditions.

The maker of Bravia LCD TVs and PlayStation game consoles attributed the revision to sliding demand for consumer electronics, a stronger yen, losses on its securities holdings and restructuring costs.

Sony said it would respond by accelerating restructuring, more than doubling a cost-cutting target for the year to March 2010 to 250 billion yen.

But analysts say that will not be enough to turn around the sprawling empire whose businesses also include semiconductors, movies and insurance. It has fallen behind Apple Inc’s iPod in portable music and Nintendo Co in videogames.

“Sony has not significantly altered reform initiatives from the December plan and will need some time to fundamentally change the business model,” Credit Suisse analyst Koya Tabata wrote in a report to clients.

Nikko Citi analyst Kota Ezawa said a change in earnings structure was “indispensable” and Sony would need to speed up outsourcing of development and production as well as cutting spending and jobs.

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 shares ended down 7 percent at 1,802 yen, underperforming a 3.8 percent decline in the benchmark Nikkei average.

($1=88.86 Yen)

(Reporting by Nathan Layne, Sachi Izumi and Taiga Uranaka;

Editing by Michael Watson)

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