Sony expected to see lower profit on global slump

TOKYO: Japanese electronics and entertainment company Sony Corp. reports its fiscal third quarter earnings on Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Sony acknowledged last week that the global slump set off by the US financial crisis has hurt its profitability so much that it expects its first net loss in 14 years for the fiscal year ending March 31. Sony, which makes Walkman portable music players and PlayStation 3 game consoles, was battered by weak demand and lower gadget prices during the critical year-end shopping season.

The soaring yen, which reduces the value of Japanese exporters' overseas earnings, has also hurt. Sony loses more than 7 billion yen for each 1 yen gain against the euro, and 4 billion yen for each 1 yen gain against the dollar.
This year would mark the first time Sony slides into red ink from troubles in its core electronics sector. Last time Tokyo-based Sony sank into a net loss, for the fiscal year ending March 1995, its movie division, marred by box office flops and lax cost controls, was to blame.

Since becoming the head of Sony in 2005, Chief Executive Howard Stringer has introduced cost cuts, encouraged better team work through the company's sprawling divisions and pushed for innovative software and service products. But he acknowledged such efforts have not gone far enough.

BY THE NUMBERS: Sony is barely expecting to break even for the October-December period, forecasting a 10 billion yen ($112.4 million) profit, down 95 percent from 200 billion yen for the same period last year. Sales are expected to dip 25 percent year on year to 2.15 trillion yen. For the fiscal year through March, Sony is expecting a 150 billion yen net loss, a reversal from 369.4 billion yen profit the previous year. Earlier, it had expected a 150 billion yen profit for the year.

ANALYST TAKE: Keita Wakabayashi, analyst with Mito Securities Co. in Tokyo, says the size of Sony's projected fiscal year loss was worse than expected, underlining weak electronics sales and damage from the strong yen. ``The question is how Sony plans to turn around its TV business,'' he said. What Stringer outlined at the news conference last week was similar to what he had said before, about how Sony hopes to create new businesses by linking its strengths in electronics products and entertainment, Wakabayashi said. ``What we want to see is a concrete plan,'' he said.

WHAT'S AHEAD: Sony has announced some restructuring measures, including cutting 8,000 of its 185,000 jobs around the world and shuttering five or six plants _ about 10 percent of its 57 factories. It is also trimming 8,000 temporary workers who aren't included in the global work force tally. But Sony likely needs a fresh product or technology to reclaim its iconic stature in the electronics industry. Stringer has promised to announce details of new improvement steps by around April.

STOCK PERFORMANCE: Sony shares have fluctuated around 2,000 yen in the last three months. The stock closed Wednesday up 5 yen, or 0.3 percent, at 1,836 yen