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Sony profits set to plunge

Company revises forecast downward

In a decidedly gloomy sign for the biz, Sony has slashed its profit and sales forecasts for fiscal 2008 for the second time in as many quarters.

For the fiscal year ending in March 2009, Sony now expects operating profit to total ¥200 billion ($2 billion), down 57% from its July estimate of $4.7 billion.

The conglom cited a strengthening yen and a declining world economy, warning the reduced targets could foretell reduced capital expenditure, plant closings or layoffs. It’s a grim turn for a company whose fortunes had improved over the past few quarters.

Sony also trimmed its fiscal 2008 net profit forecast by 38%, from $2.4 billion to $1.5 billion.

The sales forecast has been shaved by 2% from $92 billion to $90 billion.

Speaking to reporters Thursday, Sony chief financial officer Nobuyuki Oneda said that not just the remainder of this fiscal year but next year as well “will be hard going — we can’t expect a quick recovery.”

Sony expects foreign exchange market hits to the profitability of the electronics and vidgame segments to account for $1.3 billion of the drop in its operating profit forecast, with the former accounting for $1 billion and the latter $300 million of the total $2.7 billion profit prediction cut.

Sales of Bravia LCD TVs are now expected to amount to 16 million units for the year, down from the July estimate of 17 million. Sales of PlayStation Portables, however, are now forecast to total 16 million units, up from the previous projection of 15 million.

Other reasons cited for the downward revision of the operating profit forecast include stock market declines, making up $600 million of the drop, and the impact of tougher price competition and a slowing economy on the electronics segment, accounting for another $900 million.

On the other hand, by making Sony BMG a wholly owned subsid in October, Sony expects to realize a gain of $100 million in operating profit.

In its July forecast, Sony assumed that the yen would stay at 105 to the dollar through the remainder of financial year 2008 but has since ticked this estimate down to 100 yen. Likewise, it has dialed back its forecast for the euro rate from 162 yen to 140 yen.

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