Co. predicts sales drop of 14%
TOKYO — Sony Corp. has warned that it will deliver larger than expected losses — approaching $3 billion — for the current year to March.At a press conference Thursday in Tokyo, Sony CEO Howard Stringer broke the bad news together with prexy Ryoji Chubachi and chief financial officer Nobuyuki Oneda. Sony expects to report losses for this financial year of some Y260 billion ($2.9 billion), its biggest fiscal year loss in 14 years. Losses reflect plunging global demand and the strengthening of the yen against most major currencies, including the U.S. dollar. Only three months ago, the company forecast an operating profit of Y200 billion ($2.21 billion.) But conditions have deteriorated significantly since then. The sales forecast for this financial year is down 14% from October, to Y7,700 billion ($86.5 billion). The worst hit is the electronics division, which expects operating income to be Y340 billion ($3.32 billion) less than in the previous forecast, with a worsening economy and intensifying price competition accounting for Y250 billion ($2.8 billion), the rise of the yen costing Y40 billion ($449 million), additional restructuring costs totaling Y30 billion ($337 million) and losses at an equity affiliate amounting to Y20 billion ($224 million) of the total drop. In the games division, operating income is expected to be Y30 billion ($337 million) lower than previously predicted, with appreciation of the yen accounting for Y15 billion ($168 million) and worse-than-expected sales, Y15 billion ($168.5 million). For the pictures division, the operating income forecast is now Y13 billion ($146 million) below the former estimate, with additional restructuring expenses, a worsening economy and a strengthening yen being blamed. Sony’s financial and music businesses have also lowered operating income forecasts below previous estimates, by $730 million and $123 million respectively. Stringer vowed to press forward with restructuring and reform efforts, promising to “execute more quickly,” while tearing down corporate “walled silos” that have impeded efficiencies and information flows. Sony plans to unify its world hardware and software design programs, as well as consolidate its R&D efforts. By better combining its inventive brainpower, Sony intends to move beyond copycat products while restoring its reputation as an industry innovator. Also, to speed its return to profitability, on Thursday Sony announced a plant closing in central Japan, together with the layoff of 1,000 temporary workers, early-retirement offers to full-time employees and slashes in executive pay and bonuses. These and other cost-cutting measures are in addition to 16,000 job cuts announced in December. The object to reduce personnel expense by 30% by March 2010. “We can and will navigate through this, but it will not be easy,” Stringer said. Third quarter results that the company reported Thursday, saw Sony record a Y18 billion ($202 million) drop in operating profit, while sales for the period declined 25% year-on-year, to $24.15 billion. By comparison, operating profit totaled Y236 billion yen ($2.65 billion) for the third quarter financial year 2007-08.