By Mariko Yasu and Naoko Fujimura - Nov 2, 2011 6:22 PM GMT+0700
Nov. 2 (Bloomberg) -- Ben Collett, head of Japan equities at Louis Capital Markets HK Ltd., discusses Sony Corp.'s unexpected fiscal second-quarter loss reported today and full-year forecast. Collett, speaking from Hong Kong with Linzie Janis and Owen Thomas on Bloomberg Television's "Countdown," also talks about investment opportunities in Japan. (Source: Bloomberg)
Sony Corp. (6758), Japan’s largest consumer- electronics exporter, forecast its fourth consecutive annual loss and slashed television sales targets after the yen reached a postwar high and floods in Thailand cut production.
The company predicted a 90 billion-yen ($1.2 billion) annual loss, compared with its earlier forecast for a 60 billion-yen full-year profit. Sony reported an unexpected loss of 27 billion yen for the quarter ended Sept. 30, and it cut annual sales targets for TVs, personal computers, compact cameras and Blu-ray DVD players.
The projected loss comes as Chairman Howard Stringer tries to revive sales amid competition from Samsung Electronics Co. and Apple Inc. (AAPL) The company lowered its TV sales target to 20 million units from 22 million units and said Thailand’s worst floods in almost 70 years will delay the introduction of NEX and Alpha cameras, hurting annual profit by 25 billion yen.
“TV prices have continued to fall and it’s natural that Sony is losing money,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co. “Sony is struggling to end the losses at its TV unit. That shows the company can no longer produce innovative products like it used to.”
TV Restructuring
Sony shares tumbled as much as 7.9 percent in German trading after the announcement. The stock closed 3.6 percent lower at 1,520 yen in Tokyo before Sony detailed the earnings, extending the loss this year to 48 percent. That compares with a 2.3 percent gain for Samsung and a 23 percent jump for Apple.
The second-quarter loss compared with the 19.5 billion yen average profit forecast of four analysts’ estimates compiled by Bloomberg.
The maker of Bravia TVs is taking a 50 billion-yen charge for streamlining its main TV operation, which is estimated to lose 175 billion yen this fiscal year, Sony said in a separate statement. Sony will write down the value of some facilities, reduce the number of models and cut expenses at its marketing units to make the unit profitable by March 2014.
After losing about 480 billion yen in the past seven fiscal years from its TV business, Sony began a reorganization of the business into three groups yesterday. The management “feels a sense of crisis” after losses at the unit, Executive Deputy President Kazuo Hirai told reporters in Tokyo today.
The Consumer Products and Services Group -- Sony’s biggest by revenue and maker of TVs, games and cameras -- had a loss of 34.6 billion yen in the quarter ended Sept. 30, compared with a loss of 35.5 billion yen a year earlier.
Debt Crisis, Floods
Sony cut its annual compact-camera sales projection to 23 million units from 24 million, while lowering the estimate for Blu-ray disc players to 7.9 million from 9.4 million.
The Professional Devices and Solution Group, which makes semiconductors, posted a loss of 12.3 billion yen in the quarter, narrower than the 35.2 billion-yen loss reported a year earlier.
“Europe’s financial crisis, the yen’s gain and Thai floods overlapped each other to make our business condition worse,” Chief Financial Officer Masaru Kato said at a briefing in Tokyo.
The impact from the Thailand floods has not been limited to Sony. Honda Motor Co., Japan’s third-largest carmaker, on Oct. 31 withdrew its forecasts after Thailand flooding crippled its production in Southeast Asia. Honda scrapped the forecasts as it reels from a disaster that’s inundated 10,000 factories and flooded more than 80 percent of Thailand’s provinces.
Stronger Yen
Japan’s currency earlier this week dropped from a post- World War II high against the dollar after the country intervened in the currency markets. The yen gained 13 percent against the euro during the quarter ended Sept. 30, while extending its value against the dollar by 8.3 percent. A stronger yen hurts the repatriated value of sales overseas.
Sony revised its assumptions for the yen’s exchange rate to the dollar and the euro to 105 yen and 75 yen, respectively, for the fiscal second-half to March 2012. The company had projected the Japanese currency to average 80 yen to the dollar and 115 yen to the euro three months ago.
Sony made 30 percent of its revenue in Japan, 21 percent in Europe, 20 percent in the U.S. and 18 percent in Asia excluding Japan in the year ended March 31, according to Bloomberg data.
“Sony faces a difficult situation as the surrounding environment has been changing dramatically,” Yoshihiro Okumura, who helps manage the equivalent of $365 million at Chiba-Gin Asset Management Co. in Tokyo, said before the announcement.
Phones, Tablets
Last week, Sony agreed to buy Ericsson AB’s 50 percent stake in Sony Ericsson Mobile Communications AB, their London- based mobile-phone venture, for 1.05 billion euros ($1.5 billion) in cash. The deal will help Sony tap demand for smartphones and integrate the operation with its gaming and tablet offerings.
The maker of Vaio laptops today slashed its annual sales target of personal computers to 9.4 million units from the 10 million predicted three months ago.
In September, Sony offered its first tablet computer, featuring a 9.4-inch LCD display as well as front and rear cameras, in a pursuit of market leader Apple. The company released another clamshell-styled tablet last month.
Sony plans to start offering its new PlayStation Vita portable game player next month in Japan. It will go on sale in the U.S. and Europe in February. The company maintained its previous estimate to sell 15 million units of PS 3 consoles.
To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Naoko Fujimura in Tokyo at nfujimura@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
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