Sony Cuts Profit Forecast by 25% as Demand Slump Cripples Television Sales
Sony Corp. (6758), Japan’s largest exporter of consumer electronics, cut its annual profit forecast after a slump in demand in the U.S. and Europe led the company to lower its estimate for television sales.
Net income may total 60 billion yen ($771 million) for the year started April 1, the Tokyo-based company said in a statement today, revising its earlier projection of 80 billion yen. Tokyo-based Sony also cut its estimate for sales 4 percent to 7.2 trillion yen.
Sony, reeling from the March earthquake that crippled its factories and disrupted supplies, cut its TV forecast sales forecast, citing slumping demand in Europe and the U.S. Chief Executive Officer Howard Stringer, who has budgeted 14 billion yen in costs this year after the worst hacker attacks on its network, is introducing a new PlayStation game player and tablet computers to take on Apple Inc. (AAPL) and return Sony to profit after three consecutive years of losses.
“The economic slowdown, especially in the U.S. and Europe, is leading to a significant drop in TV prices, worsening the industry’s over-supply situation,” Kota Ezawa, a Tokyo-based analyst at Citigroup Inc., said before the earnings. “Sony will need to promote more restructuring.”
Sony fell 1.1 percent to close at 2,013 yen in Tokyo trading before the announcement, widening its loss this year to 31 percent. Japan’s benchmark Nikkei 225 Stock Average has slid 3.2 percent.
Sony kept its annual operating profit forecast unchanged. It fell 59 percent to 27.5 billion yen in the first quarter.
Sales of Bravia televisions worldwide this year will be 22 million units, compared with an earlier estimate for 27 million, Sony said in the statement today. Losses from the business may be as large as in the year ended in March, Chief Financial Officer Masaru Kato told reporters in Tokyo today, without elaborating.
Samsung Electronics Co., the world’s largest maker of televisions, earlier this month reported a 26 percent drop in second-quarter operating profit after a slump in sales of flat screens masked a surge in demand for smartphones and tablet computers. The Suwon, South Korea-based company will report its earnings tomorrow.
“Matured markets such as Europe and the U.S. started to slow down,” Kato said. “That’s clearly affecting our TV business. Shipments and sales are significantly lower and not reaching our target.”
Sony also reported first-quarter net loss of 15.5 billion yen, compared with profit of 25.7 billion yen a year earlier. That missed the 2.5 billion yen loss average of three analysts’ estimates compiled by Bloomberg.
The maker of the Walkman music players booked net charges of about 700 million yen in the quarter toward expenses of restoring factories after the March 11 earthquake in Japan forced a shutdown of factories.
The consumer products and services group, the division that handles liquid-crystal display TVs, Vaio laptop computers, Cyber-shot cameras and PlayStation game consoles, had an operating income of 1.7 billion yen in the first quarter.
The professional, device and solutions group had an operating income of 2.3 billion yen in the quarter while the film division unit had an operating income of 4.3 billion yen. The financial services unit had an operating income of 28.7 billion yen in the first quarter.
Sony, the maker of Vaio laptops, plans to start offering two models of its first tablet computers, the company said in April. Sony is following Samsung and Motorola Mobility Holdings Inc. in their pursuit of Apple, more than a year after the iPad spurred a surge in demand for the devices.
Sony’s S1 model will feature a 9.4-inch liquid-crystal display, as well as front and rear cameras. The S2 laptop-shaped model will have dual 5.5-inch screens and feature cameras, according to the company.
Last month, Sony named its next portable video-game player the PlayStation Vita and said the cheapest model will cost $249 in the U.S., 249 euros in Europe and 24,980 yen in Japan. Sony plans to start selling the Vita, which will have a five-inch display using OLED, or organic light emitting diode, technology and a rear touch pad, by the year-end holiday season.
Sony assumed an exchange rate of 80 yen to the dollar while computing the forecasts compared with an earlier estimate for 83 yen, according to the statement. The exchange rate for the euro to the yen was kept unchanged at 115 yen.
The three consecutive losses were the first in Sony’s history since its listing in 1958.
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