… but bleak forecast rocks stock in Tokyo
NEW YORK — Sony Pictures — on the strength of “Spider-Man” and a handful of other pics — was the brightest spot in parent Sony Corp.’s latest earnings report.
But the Japanese giant’s profit came in below expectations and the company issued a bleak outlook for this year. As a result, investors pounded the stock, which fell nearly 14% to $27 in U.S. trading Thursday.
On the Tokyo Stock Exchange Friday, Sony shares did not trade at all due to a lack of buyers, even at an offer price 13% below Thursday’s close. It was the largest one-day drop in Sony’s share price in 15 years.
Revenue eased 1.4% to $62 billion for the fiscal year ended in March. Operating income jumped 38% to $1.5 billion, still well below the $2 billion-plus figure Sony itself predicted in January. Net profit surged six-fold to $963 million, due in large part to cost cuts and a $511 million gain on the sale of Telemundo.
Sony predicts a 30% plunge in operating profit and lower revenue this year.
Chairman Noboyuki Idei acknowledged at a press briefing in Tokyo that the company is at “a turning point” and said profitability has been dropping gradually from a peak in 1997. To turn the tide, Sony is embarking on a massive $10 billion investment push over the next three years, ahead of its 60th anniversary in 2006. A $1.4 billion restructuring will focus on Electronics, Sony’s biggest division and its biggest sore spot.
At Sony Pictures, revenue rose 26% to $6.7 billion. Operating income surged 88% to a record $491 million, led by theatrical and homevideo perfs of Spidey, “Men In Black II,” “XXX” and “Mr. Deeds” — mostly pics from last summer. Some releases later in the year, like “I Spy” and “Stuart Little 2,” were disappointments. Sony said it won’t be able to match Pictures’ stellar results in fiscal 2004.
Costs under scrutiny
As its corporate parent looks to pinch pennies, a new seven-member committee was named last week to examine costs and business structures at the studio. It’s led by Sony Corp. of America topper Howard Stringer and includes SCA financial chief Rob Wiesenthal, top studio execs and Joe Roth, head of Sony Pictures’ partner Revolution Studios. The committee has had several meetings so far via conference call. Stringer, who was recently named a vice chairman of Sony and appointed to the board, and Wiesenthal are based in New York.
Sony Music saw revenue ease 1% to $5.3 billion and swung to an operating loss of $72 million. The division cited a slump in the global music biz and digital piracy. In the past year, Sony Music took a $190 million restructuring charge, laid off 1,400 staffers and reshuffled top management, bringing in NBC exec Andrew Lack to replace Tommy Mottola.
Despite continued market softness, Sony expects music to post a profit this year as the bulk of restructuring is behind it and costs are down.
Electronics saw sales drop 6.5% to $41 billion. It swung to an operating profit of $345 million partly due to favorable exchange rates that inflated earnings at most divisions. The unit saw thousands of layoffs in the first stages of a sweeping restructuring. Sony fretted about the future of the unit, given an uncertain economic environment, slowing personal consumption and price competition.
Games revenue fell 4.9% to about $8 billion as Sony cut the price of PlayStation hardware. Operating income rose 36%, due to lower manufacturing costs and exchange rate benefits.