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Sony CEO Says First TV Profit in Decade Possible With Sales Miss

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Sony CEO Kazuo Hirai
Kazuo Hirai, president and chief executive officer of Sony Corp. Photographer: Tomohiro Ohsumi/Bloomberg

May 26 (Bloomberg) -- Sony Corp. Chief Executive Officer Kazuo Hirai said the company’s struggling TV unit could make its first profit in more than a decade even if it misses sales forecasts by as much as 16 percent.

Hirai also said reform of the Japanese icon is ongoing as it tries to rebound from a projected sixth loss in seven years. The company expects 135 billion yen ($1.3 billion) of costs related to restructuring and to exiting the personal-computer business this year.

“We’ll never see zero restructuring,” Hirai told a group of reporters today in Tokyo. “We are always in the process of renewal.”

Hirai, who cut last year’s net-income forecast three times, is trying to overcome slumping demand for the TVs, cameras and PCs that underpinned Sony’s rise. The company unexpectedly forecast a 50 billion-yen net loss this year while cutting more jobs and selling assets amid a search for new hits to build on its success with the PlayStation 4 game console.

Hirai said last week the measures he is implementing, including cutting almost $1 billion a year in costs, will help generate the first profit in TV manufacturing in 11 years. The company forecast sales of 16 million liquid-crystal display sets this fiscal year, though Hirai said today it can still make money if it sells only 13.5 million units, the same number as last year.

Operating Profit

“Hirai wants to complete restructuring, but whether Sony has sufficient free cash flow to do that is questionable,” Ryosuke Katsura, a Tokyo-based analyst at UBS AG, said before the briefing.

Employee buyouts may add to restructuring costs, Katsura said.

Sony is targeting 400 billion yen in operating profit by the end of March 2016, spurred by the creation of a new TV business. It also will seek to reduce costs at its pictures division by $300 million during the same period.

Earlier, Sony agreed to form two ventures with Shanghai Oriental Pearl (Group) Co., owner of the Oriental Pearl Tower, to start making and selling PlayStation consoles in China after that nation lifted a 13-year ban on sales of the machines. Sony will have a 70 percent stake in one venture and 49 percent in the other, according to a statement filed with the Shanghai Stock Exchange.

Sony rose 3.1 percent to close at 1,683 yen in Tokyo trading. The shares are down 7.8 percent this year, compared with the 8.3 percent drop on the benchmark Topix index.

The move by Sony comes after Microsoft Corp. announced plans to sell its Xbox One machine in China, and Nintendo Co. said it plans to expand in emerging markets with new devices.

China’s video-game industry will generate about $10 billion in sales next year, according to PricewaterhouseCoopers LLP, and console makers are trying to distract Chinese players from games on their smartphones and tablet computers.

To contact the reporters on this story: Grace Huang in Tokyo at xhuang66@bloomberg.net; Marco Lui in Tokyo at mlui11@bloomberg.net; Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Aaron Clark

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