Sony posts surprise loss on TV demand slump

Technicians install Sony's 4K Ultra HD television at

Technicians install Sony's 4K Ultra HD television at the Sony booth at the International Consumer Electronics Show in Las Vegas. (Jan. 7, 2013) Photo Credit: AP

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Sony Corp., Japan's biggest consumer electronics exporter, reported an eighth consecutive quarterly loss on waning demand for TVs and consumer preferences for devices from Apple Inc. and Samsung Electronics Co.

The net loss narrowed to 10.8 billion yen ($115 million) in the three months ended December from 159 billion yen a year earlier, the Tokyo-based company said in a statement Thursday. The TV maker was expected to post a 21 billion-yen profit based on the average of three analyst estimates compiled by Bloomberg. The company reiterated its forecast for annual net income of 20 billion yen, its first profitable year in five.

The Tokyo-based Walkman inventor has lost market share as it struggles to develop products to compete with Apple's iPads and Samsung's Galaxy smartphones. A weaker yen, which boosted earnings at domestic rivals Panasonic Corp. and Sharp Corp., wasn't enough for the company to overcome a slump in global TV demand, and it said it may sell more assets this fiscal year.

"Sony's earnings are really disappointing," said Ichiro Takamatsu, a fund manager at Bayview Asset Management Co., which oversees about 150 billion yen. "It hasn't restructured its business thoroughly enough."


Sony cut its full-year sales targets for TVs to 13.5 million units from 14.5 million, for compact cameras to 15 million from 16 million, and for portable game players to 7 million from 10 million. It kept its smartphone sales target at 34 million units.

The electronics business faces a "tough environment," Chief Financial Officer Masaru Kato said at a briefing.

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Sony projects an 80 billion-yen loss at its TV-making operations this fiscal year. Imaging and gaming units will also have "significant' drops in operating profits, it said.

The company rose 2.6 percent to 1,519 yen in Tokyo trading before the earnings announcement. It has jumped 59 percent this year, compared with a 9.3 percent increase in the benchmark Nikkei 225 Stock Average.

Chief Executive Officer Kazuo Hirai, who took over in April, is trying to revive the electronics business by focusing on mobile devices, games and digital imaging. He is cutting 10,000 jobs and has pledged to make the TV unit, the world's third- biggest, profitable in the year starting April 1 after nine straight years of losses.


Third-quarter restructuring charges increased to 16.7 billion yen from 4.5 billion yen a year earlier.

"It was probably the busiest 10 months in Sony's history," Kato said. "We'll maintain the speed of our reform and will focus on bringing results next fiscal year." Sony's mobile-products division, which makes Xperia smartphones and tablet computers, posted an operating loss of 21.3 billion yen, narrower than the loss of 48.4 billion yen a year earlier. The loss at the home-entertainment unit, which includes TVs, narrowed to 8 billion yen from 89.8 billion yen.

"Nothing substantial has really changed in Sony's businesses," Keita Wakabayashi, an analyst at Mito Securities Co. in Tokyo, said before the announcement. "TV is no longer a cash cow, and the outlook for Japanese consumer-electronics makers remains tough." Panasonic, Sharp Panasonic posted a surprise net income of 61 billion yen in the three months ended December, while Sharp made its first operating profit in five quarters. The yen has plunged since the end of September, helped by new Prime Minister Shinzo Abe's call for "bold monetary policy" to beat deflation and weaken the currency.

Currency depreciation will boost Sony's second-half sales by 130 billion yen and its operating profit by 17 billion yen, Kato said.

"It's not that we are counting on a weaker yen trend, but if the trend continues, there will be a significant upside for our earnings in the coming fiscal year," he said.

To help fund its revival, Sony said last month it will sell its New York headquarters to investors led by Chetrit Group for $1.1 billion. The deal, set to close in March, will generate an operating income gain of about $685 million, Sony said Jan. 18.

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The company also raised 150 billion yen selling five-year convertible bonds in November, its first offering of such securities since 2003.


Sony is counting on new products to help lure consumers from Apple iPads and Samsung Galaxy devices. At last month's Consumer Electronics Show in Las Vegas, it introduced new higher-definition TVs, water-resistant smartphones and a more- powerful digital camera. The company also revealed plans to offer Ultra-High Definition content from Sony Pictures for downloading on its TVs.

A PlayStation event has been announced for Feb. 20, stoking speculation the company will unveil a fourth-generation console. Sony also has invested in medical-device maker Olympus Corp. and gaming platform company Gaikai Inc., and in facilities to make image sensors.

Suwon, South Korea-based Samsung -- the world's biggest maker of smartphones, TVs and computer-memory chips -- last month warned that profit this year would be hit by a strengthening won. It also said global demand for smartphones was slowing.

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Apple's profit grew at the slowest pace since 2003 in the quarter ended December as the lack of a low-cost iPhone dented growth in emerging markets.

Worldwide smartphone shipment jumped 36 percent to 219.4 million units in the fourth quarter, according to IDC. Sony's market share rose to 4.5 percent from 3.9 percent a year earlier, the researcher said. Samsung was No. 1 with 29 percent of the market, followed by Apple with about 22 percent.

Global flat-panel TV shipments probably fell 2 percent to 217.7 million units last year, the first annual decline, according to DisplaySearch. Industrywide revenue this year may fall 1 percent to $104.6 billion, following a 6 percent decline last year, according to the researcher.

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