Sony Expects $2 Billion Loss for Fiscal Year

Sony logo

In another bad sign for the Japanese electronics giant, Sony has forecast a net loss of $2.15 billion for the current fiscal year, nearly five times its original estimate of $488 million (JPY50 billion ) through March of 2015.

The company blamed the drastic downturn on poor smartphone sales and said that it will take a $1.76 billion (JPY180 billion) impairment charge against the phones division in the second quarter.

The group’s overall sales and revenues forecasts are unchanged at $76 billion (JPY7.8 trillion), but instead of making an operating profit, the group now expects to record operating level and pre-tax losses.

It explained that instead of trying to grow its phones business, it will now focus on reducing risk and volatility in the segment which it says is subject to “significant change in the market and competitive environment.” It will now change strategy in certain geographical areas, concentrate on its premium lineup, and reduce the number of models in its mid-range lineup.

The smart phones sector is undergoing a period of turmoil with a number of newer manufacturers challenging the dominance of Samsung and Apple, and introducing cheaper models that sell well in middle and lower income countries.

The problems in the phones division is a very significant blow for the company, which has suffered years of difficulties in its TV set manufacturing and PC businesses, but which as recently as July surprised on the upside. In the first quarter it unveiled a profit of JPY26.8 billion ($261 million), boosted by stronger earnings in the Games & Network Services division.

In the first quarter, the corporation’s ‘pictures division,’ which Sony has been under pressure to sell and where there has recently been a spate of high profile executive exits, recorded an operating profit of JPY7.8 billion ($76 million), more than double the 3.7 billion yen ($36 million) reported in the first quarter of FY2013.