An electronics store in Tokyo last month. The projected annual loss of $2.86… (Koji Sasahara, Associated…)
Kazuo Hirai had little to celebrate after just being crowned the next chief executive of Sony Corp.
Pummeled by a weak global economy, natural disasters and a strong yen that made its products more expensive overseas, Sony said it was on track to lose $2.86 billion in its current fiscal year, one of the Japanese technology and entertainment giant's worst annual results.
The projected annual loss was more than double what Sony anticipated just three months ago when it forecast a $1.2-billion loss for its fiscal year ending March 31.
Although the lion's share of the additional red ink — about $1.5 billion — would come from one-time charges from the sale of its stake in an LCD panel facility, foreign exchange fluctuations and other write-offs, about $181 million would be attributed to weakness in Sony's performance, analysts said.
"The raw numbers make it look worse than it actually is," said Andy Hargreaves, analyst with Pacific Crest Securities. "But it definitely has not been a good year for Sony."
The revised forecast came as Sony reported its dire third-quarter financial results: a $2-billion loss and a sharp decline in sales, as the company was battered by a strong yen and floods in Thailand that hobbled several of its factories. Sales slid 17.4% to $23.4 billion in the quarter ended Dec. 31. Its net loss contrasted with a $950-million profit in the same period a year earlier.
The bulk of the losses stemmed from Sony's core consumer electronics business, where it was forced to cut the prices of its LCD television sets below production costs to compete with lower-priced rivals. Compounding the problem was the high yen, which made its products more expensive outside Japan.
Sony's PlayStation business also contributed to the sharp decline. The unit racked up higher marketing costs in the quarter, with expenses to promote its PlayStation Network online entertainment services, while revenue suffered from a price reduction of its PlayStation 3 game console.
Hirai, who on Wednesday was announced as Howard Stringer's successor as Sony's president and CEO, said last year that fixing the LCD television business would be the company's No. 1 priority this year.
Sony's film business was a bright spot in an otherwise gloomy financial picture. Its Culver City-based movie and television studio Sony Pictures Entertainment posted a 7.7% increase in revenue to $2.1 billion, ending the quarter with a $9-million profit. Sony attributed the gains to a higher number of box-office releases in the quarter, which helped offset a decline in DVD and other home entertainment revenue. For the first six months of its fiscal year, Sony posted $4 billion in revenue and $321 million in operating income.
Sony's music business saw revenue and operating income decline, but remain profitable, bolstered by continuing strong sales of Adele's "21" album as well as music from the "Glee" TV show. The group's sales fell 11.7% to $1.6 billion, while its profit of $196 million was down 21.7% from a year earlier.
Sony shares lost $1.10, or 6%, to close at $17.09 on the New York Stock Exchange on Thursday.