Sony Forecasts $1.7 Billion Loss, First In 14 Years

TOKYO — Sony Chief Executive Howard Stringer acknowledged Thursday he had not gone far enough with cost cuts and efforts to combine entertainment with electronics as his company projected its first annual loss in 14 years.

"More has to be done and more can get done," Stringer said at a hastily called news conference at Sony's Tokyo headquarters. "We have a long way to go."

Sony Corp. said it will offer early retirement to employees at its prized TV division, seeking to trim personnel costs there by 30 percent. It is also slashing jobs at its movies, music and game businesses. Sony did not give a head count target for the reductions. It said it is cutting 1,000 temporary workers when it closes one of two TV plants in Japan.

Stringer said he and two other top executives, including President Ryoji Chubachi, will give up their entire bonus, which would halve their annual pay, according to Sony. Other executives and managers will see lower pay.

But Koya Tabata, electronics analyst at Credit Suisse in Tokyo, was skeptical about Sony's prospects.

"There was no change to his strategy. What he said was more of the same," he said of Stringer's remarks. "And that's bad."

Last month, Sony had already said it would cut 8,000 of its 185,000 jobs around the world and shutter five or six plants _ about 10 percent of its 57 factories. It would also trim 8,000 temporary workers who aren't included in the global work force tally.

Stringer said Sony needs carry out management decisions from the top more quickly to fix its problems.

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"There is still a lot of the old Sony, and not enough of the new Sony," he said.

Battered by slumping sales and a strong yen, Sony expects to sink into a 150 billion yen ($1.7 billion) net loss for the fiscal year through March, a reversal from 369.4 billion yen profit the previous year.

"The massive economic upheaval being experienced across the globe is sparing no one in the consumer electronics world," Stringer said, adding that details of the additional steps will be announced in April or May.

The last _ and only _ time Sony reported a loss, for the fiscal year ending March 1995, the red ink came from one-time losses in its movie division, marred by box office flops and lax cost controls.

Sony joins some of Japan Inc.'s biggest names in painting bleak outlooks. Toyota Motor Corp. is forecasting its first operating loss in 70 years _ although it says it will eke out a small net profit.

Sony, which makes the Walkman player and PlayStation 3 game machine, also lowered its sales forecast for the fiscal year through March to 7.7 trillion yen, down 13 percent from the previous year.

Welsh-born American Stringer, who in 2005 became the first foreigner to head Sony, has repeatedly promised to get Sony's sprawling businesses to work together to deliver on innovative products that exploit Sony's rich movie, game, music and other entertainment content to sell hardware products.

Sony made important errors in recent years, falling behind in flat-panel TVs and portable music players.

Company officials said a reason it was continuously in the red in its TV unit was that it was difficult to adjust the purchasing of panels amid volatile price changes. Sony no longer makes liquid-crystal display panels on its own, and has a joint venture with Samsung to procure panels.

The efforts announced Thursday are expected to save Sony 250 billion yen for the fiscal year ending March 31, 2010.

Other measures include outsourcing software development in India, signing deals for making cheaper products in emerging markets, and reducing advertising expenses.

Sony has taken a beating from the global slump that crimped consumer spending during the critical year-end shopping season. It is particularly vulnerable to the strong yen since about 80 percent of its sales come from overseas. The dollar has dropped to below 90 yen recently from as high as 117 yen last year, eroding with it Sony's foreign income.

In October, it lowered its forecast to a 150 billion yen ($1.7 billion) profit. But conditions worsened since then, as profitability worsened not only at its core electronics unit but also at its video game, movie and financial businesses, it said.

"We must move ahead with reforms, but my mission is to also nurture innovation," Chubachi said. "We will become a strong Sony."

The company's stock fell 51 yen, or 2.6 percent, to 1,938 yen. The earnings revision was announced after the market closed.

Comments

[jerrypl]

Sony---a 14 year low!! Is anyone really surprised? The economy is slipping over the edge of a massive cliff, and the consumer has been totally burned up; therefore, is it no surprise that corporate America will feel the pain, too?

DUH!

http://eye-on-washington.blogspot.com

[davidwayneosedach]

Just look at the strength of the yen. How can they sell competitively here in the United States?

[CarlaDahlia]

Today Microsoft just did the same thing. So many people are currently out of jobs. Now that the excitement of inauguration is over, we are back to the gloomy economic crisis. I pretty confidant that with Mr. Obama lead, he will do something about this situation. Looking at http://www.jobstaxi.com, i think the numbers for employment will shoot up within days. Already the job market's steadily moving into a different curve, so heads up everyone.

[loki]

I think its because Sony use to stand for quality . If it said Sony, you knew it was a great product. Within the last 10 years they have just become another product pushing megamarketing maching without really caring how good the product really is.

[sueinmn]

Sony made the mistake of getting into the Chinese manufacturing and we all know its junk from there. The Japanese actually made good products. I have alway bought Sony laptops and my present one ---China. Just not the same! runs hot, clicky sounding left mouse. Next time I will simply go cheap as they are all alike now outside of Apples..

[KCFreedom]

"There is still a lot of the old Sony, and not enough of the new Sony"

The old Sony made better products.

"Other measures include outsourcing software development in India"

Oh, joy! There's a typical conventional wisdom response they will live to regret.
Many U.S. companies are learning that hard lesson lately.

At least Sony's executives are forgoing their bonuses. Something U.S. companies just can't learn.

Let's face it, Sony is too big to manage anymore. They should decide if they want to be an electronics company or an entertainment company and just stick with it. It's a "frankencorp".

[Tom95134]

"Other measures include outsourcing software development in India"

Outsourcing software development to India works fairly well as long as you have clear requirements and well defined development controls. The historical problem surrounding product development in many Japanese companies (not just Sony) is there are very few real, documented requirements that guide the process. Much is done based on the principal of "group think" where the team all understands what is to be developed because they all work in the same office. At one time this worked well because there were people in the group that really understood the industry and the product need. Much of this expertise has been lost because of shortsighted early retirement packages (to reduce costs).

"Sony is too big to manage anymore. "

Sony, when they swept the market as the leading provider of broadcast television equipment operated as a conglomeration of small/medium size "companies" run/staffed by people that were leaders in the industry with many years of experience. Sony (the company) simply provided the structure of a large company to support these individual businesses and protected them from short term fluctuations. Since the bean counters have taken over (the typical demand for 18 months from conception to profitability cycle of American businesses) there is little that has been done in truly innovative work which has been brought to market as new product. Many Sony products are now developed and produced as part of joint ventures and then just sold under the Sony marque.

[Samalabear]

For one, they should have stuck to what they were good at. But, no, they had to be greedy and become part of Hollywood. All these companies were in a race to see who could out-conglomerate the other first.