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Sony Misses Analysts’ Estimates After Widest Annual Net Loss in 16 Years

For Chief Executive Officer Howard Stringer, this was supposed to be Sony Corp. (6758)’s year.

The company that invented the Walkman was preparing to launch the new PlayStation Portable player and its first tablet computers in time for Christmas, the money-losing games division finally turned profitable and Stringer had picked the front- runner to eventually succeed him in Kazuo Hirai. That was less than three months ago.

Then Japan’s strongest earthquake on record hit and hackers invaded the company’s Internet entertainment services in the second-largest online data breach in U.S. history. The result: Sony yesterday posted its widest annual net loss in 16 years and forecast the earthquake and the attack will erode $2 billion from operating profit this fiscal year to keep earnings from meeting analysts’ estimates.

“Sony said it was going to be its year but it looks like it then got a smack in the eye,” said Shiro Mikoshiba, an analyst at Nomura Holdings Inc. in Tokyo. “In terms of earnings, we’re probably going to have to wait for six months or so before we can hope to see impressive results.”

Sony, Japan’s biggest exporter of electronics, rose 2.7 percent to close at 2,270 yen in Tokyo. Disclosing the estimated financial toll of the earthquake and cyber attacks removes a “major negative catalyst,” Jay Defibaugh, an analyst at MF Global FXA Securities Ltd.

Photographer: Tomohiro Ohsumi/Bloomberg

Howard Stringer, chief executive officer of Sony Corp. Close

Howard Stringer, chief executive officer of Sony Corp.

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Photographer: Tomohiro Ohsumi/Bloomberg

Howard Stringer, chief executive officer of Sony Corp.

Operating income in the 12 months to March 2012 will be similar to the 200 billion yen ($2.5 billion) last fiscal year, the Tokyo-based company said in a preliminary earnings statement yesterday. The forecast missed the 254.7 billion-yen average of nine analyst estimates compiled by Bloomberg.

Earthquake, Hackers

Sony estimated the March 11 earthquake will erode operating profit by 150 billion yen this fiscal year as the maker of Bravia televisions struggles to improve earnings even after restarting the plants that were disrupted by the disaster. Last month’s unauthorized intrusion into the PlayStation network may cost the company 14 billion yen, it said.

Chief Financial Officer Masaru Kato said yesterday the lowered profit outlook forced Sony to write down the value of the deferred tax assets by 360 billion yen last quarter, resulting in a net loss of 260 billion yen. It was also the first time Sony posted three consecutive full-year losses since its listing in 1958.

Harsh Environment

“This may be a conservative forecast, but the operating profit level still looks much lower than expected even if you take the earthquake impact into account,” said Kazuharu Miura, a senior analyst at SMBC Nikko Securities Inc. “Sony continues to face a harsh business environment.”

Still, Sony yesterday forecast its net loss will turn positive this fiscal year and revenue will likely increase after a 0.5 percent drop.

Growth was on Stringer’s mind March 10, when he spoke to reporters in Tokyo about the promotion of Hirai, his games chief, as the frontrunner to carry out the vision to integrate Sony’s TVs and computers with content from the entertainment businesses.

“It’s a very exciting year,” Stringer said then. “We have a tablet coming out, we have the PlayStation network for the video and music services growing in strength,”

The following day, the earthquake hit, crippling scores of factories including those of Sony. Nine of the company’s electronics factories in northeastern Japan that had been disrupted by the disaster had resumed operations as of April 28, according to the company. Other plants had to curtail production because of material and component shortages.

About a month later, the maker of PlayStation game consoles was attacked by hackers who may have gained information on more than 100 million user accounts of Sony’s online services for games, music and films.

The PlayStation Network and Qriocity entertainment services went back online in the U.S. and other regions excluding Asia on May 15, more than three weeks after it suspended services. The company plans to fully resume the services by the end of this month.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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