Sony Reports First Annual Loss in 14 Years

Sony announced a $1 billion annual net loss for fiscal 2008, its first annual net loss in 14 years, saying sliding sales, competition in pricing and a strong yen hurt the company, according to The Wall Street Journal.

The Japanese electronics maker, however, forecasts an even bigger loss ($1.26 billion) for the current fiscal year ended March 31, 2010. This would be the first consecutive annual losses in company history, according to the report.

Sales fell 22 percent in the quarter ended March 31, while annual sales slid 12.9 percent to 7.73 trillion yen. (Sony's full financial report.)

The Associated Press reports Sony continues to lose money in its gaming segment, where the PlayStation 3 (PS3) and PlayStation Portable (PSP) have struggled against the competition. Here are the sales numbers:

• Sold 10.06 million PS3s, up 10 percent from previous year
• Sold 14.11 million PSPs, up from 13.81 million last year

"In the longer term, we are all waiting for the PlayStation network business to deliver profits," says Koya Tabata, an analyst with Credit Suisse in Tokyo. "But that depends on management."

Changes Need to be Made

Sony is looking to cut costs by more than 300 billion yen and will implement more cost-cutting measures than previously planned, including:

• Eliminating more than 16,000 jobs
• Closing four plants in Japan
• Closing or selling factories in the U.S., Mexico, Indonesia and France

Sony chief financial officer Nobuyuki Oneda says more cuts will come in the future.

"As far as the restructuring measures go, it's not that we're doing anything that different," Oneda says. "We are just going one more step." Sony is expected to announce more details on a restructuring effort in June.

Analysts say Sony's biggest problem is its "cost base." Sony buys many of its components, but assembles the products in-house. Analysts say Sony must start outsourcing the manufacturing or "sharply reduce its in-house cost structure," according to the report.

Sony also needs to stem losses from its TV segment, which makes about three-quarters of its business. It expects LCD TV sales to remain flat in the fiscal year to March 31, 2010 at 15 million units. Eric Lee, an analyst at Barclays Capital Japan, says Sony suffered about a $2.07 billion loss in its TV segment.

"[The TV business] hasn't made money in years, even when the market was experiencing huge unit-volume growth," Lee says.

Sony shares are down about half from the price one year ago.

Related: Sharp, Sony Form New LCD Company for Joint Venture
Sony to Report Annual Loss, Will Close TV Plant
Sony to Cut 16,000 Jobs


Source: Reuters