Jan. 22 (Bloomberg) -- Sony Corp. forecast a record 260 billion yen ($2.9 billion) full-year operating loss, almost four times analysts’ estimates, as the global recession cuts sales of televisions and cameras.

Weaker demand, the stronger yen and reorganization expenses led to the earnings shortfall, Tokyo-based Sony, which had forecast profit of 200 billion yen, said today. The company was projected to post an operating loss, or sales minus the cost of goods sold and administrative expenses, of 70 billion yen, based on the median estimate in a Bloomberg survey of five brokerages.

The outlook increases pressure on Chief Executive Officer Howard Stringer, 66, who is reorganizing the main electronics business after failing to meet his pledge to raise Sony’s operating profit margin to 5 percent. Recessions in Europe, Japan and the U.S. have cut consumer spending, while Sony lacks hit products that have powered profits at Apple Inc. and Nintendo Co.

“You can cut workers, but Sony’s products still don’t sell,” said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. He declined to disclose his holdings. “This doesn’t look like a one-time shock, so the question of how much worse it will get still remains.”

Sony shares traded at the equivalent of 1,896 yen as of 12:55 p.m. in Frankfurt, down 2.2 percent from the close in Tokyo. The Tokyo-traded stock plunged 69 percent in 2008, erasing 4.3 trillion yen of investor value.

Sony’s TV business, its largest by revenue, hasn’t posted an annual profit since the year ended March 2004.

‘In A Hurry’

“It’s my responsibility to change Sony and bring it back to its former profitability, and it’s my foremost priority,” Stringer, who became CEO in June 2005, said at a briefing in Tokyo. “We have to move in a hurry.”

The company said it will offer an early retirement plan and expects to save 250 billion yen next fiscal year by reorganizing. Sony will book restructuring expenses of 110 billion yen in the 12 months starting April 1, and 60 billion yen this fiscal year.

The electronics maker also said it will cut executives’ pay, and Stringer, President Ryoji Chubachi and Executive Deputy President Katsumi Ihara won’t receive bonuses this fiscal year and their combined salaries will be reduced 50 percent.

Overall sales will probably fall 13 percent to 7.7 trillion yen, against the 9 trillion yen projected previously, Sony said. The Bloomberg survey predicted 8.29 trillion yen.

The net loss will be 150 billion yen, worse than the 74 billion yen median deficit estimated in the survey and the 150 billion yen profit Sony forecast in October. The loss is the first in 14 years and second biggest in Sony’s history.

Third-Quarter Slide

The company said net income plunged 95 percent to 10 billion yen for the fiscal third quarter ended Dec. 31, and sales dropped 25 percent to 2.15 trillion yen, based on preliminary figures. The operating loss was 18 billion yen, shifting from profit of 236.2 billion yen a year earlier.

Sony, also the maker of the PlayStation 3 console, said weak demand, the yen’s gains, reorganization costs and worsened earnings at subsidiaries will reduce full-year profit at the electronics business by 340 billion yen from its earlier forecast.

The Bravia television maker cut its target for TV shipments and PlayStation Portable machines this year to 15 million units for each product, from an earlier projected 16 million. The company said it still expects to shop 10 million PlayStation 3s.

Sony said it’s assuming a yen exchange rate of 90 to the dollar and 120 to the euro for the fiscal fourth quarter, compared with 100 and 140 projected on Oct. 23.

Yen’s Surge

The yen jumped 30 percent against the euro and 24 percent to the dollar last year, the best performer among 16 major currencies tracked by Bloomberg. A stronger yen damps the value of overseas earnings when repatriated.

The yen’s gains will cut 15 billion yen and lower-than- anticipated sales will erode earnings by 15 billion yen at the game business. The movie unit’s earnings will miss Sony’s forecast by 13 billion yen, and other divisions, including the music business, by 11 billion yen.

The financial business will erase 65 billion yen from Sony’s profit, mainly because of deteriorated earnings at Sony Life Insurance Co. The figure may worsen, depending on stock-market movements in the first three months of 2009, the company said.

“The problem is that in the really fantastic economic circumstances we enjoyed in last five years, Sony has never made as much money as it should’ve done,” Pelham Smithers, head of Asian research at Pali International Ltd., said before Sony’s announcement. He has a “buy” rating on the company.

Cuts and Closures

Sony said Dec. 9 it will cut 16,000 people by March 2010 to help save more than 100 billion yen in annual costs, the second major job reduction announced under Stringer’s tenure.

It plans to spend 30 percent less at the electronics unit than intended under a mid-term strategy and reduce the number of factories by about 10 percent from the current 57, the company said at the time.

Sony said today it will shut by June its Ichinomiya factory in Aichi prefecture, central Japan, adding to previously announced closures in France and Pennsylvania. The plant makes products such as projectors and monitors and employs 1,500 people, including 630 full-time employees, according to Sony’s Web site.

The company pledged on June 27 to raise its operating profit margin to a minimum of 5 percent, a level not seen in a decade. It didn’t provide a timeframe to achieve the margin, the percentage of sales left after subtracting the cost of goods sold and administrative expenses.

Apple had an average operating profit margin of 13.28 percent in the past five fiscal years, according to data compiled by Bloomberg. The iPod maker yesterday posted quarterly earnings that beat analysts’ estimates, overcoming the worst U.S. holiday shopping season in at least four decades.

Nintendo’s level in the five-year period was 22.56 percent.

“I’ve been a CEO for 25 years, I’ve been through layoffs before, I’ve been through tough times, bad headlines,” Stringer told reporters. “The only thing you can do is to speak to the employees, constantly mingle with the employees, constantly reinforce that together we can get through this crisis.”

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net; Junko Hayashi in Tokyo at juhayashi@bloomberg.net.

Last Updated: January 22, 2009 07:03 EST