Sony Forecasts $1.1 Billion Loss as Hirai Misses TV Profit Goal

Feb 06, 2014 5:42 pm ET

Feb. 7 (Bloomberg) -- Sony Corp. forecast a $1.1 billion loss and will cut 5,000 more jobs as Chief Executive Officer Kazuo Hirai sells its personal-computer business and splits the television division into a separate unit.

Sony hasn’t ruled out selling its TV business in the future after receiving “various offers,” Hirai told reporters in Tokyo yesterday. The net loss will total 110 billion yen in the year ending March 31, the company said in a statement, scrapping its revised October forecast of a 30 billion-yen profit. The U.S. traded shares rose.

Hirai expanded his reorganization after failing to meet a pledge to end TV losses this year and spur a revival, having announced at least 10,000 job cuts previously and plans to focus on mobile devices, games and imaging products. Sales of Sony’s key products are declining as the company struggles to find new hits and consumers shift to mobile devices by Apple Inc. and Samsung Electronics Co.

“The reform announced today comes far too late,” said Masahiko Ishino, an analyst at Advanced Research Japan Co. “Sony cannot take measures ahead of changes in market deterioration. There isn’t much hope to revive the electronics business overall.”

The company will sell its PC business, which produces notebooks under the Vaio brand, to buyout firm Japan Industrial Partners Inc., Sony said yesterday.

Sony doesn’t have specific plans for a sale of the TV unit, which will be split into a wholly owned unit, Hirai said without elaborating.

Hirai’s Plan

The company’s full-year operating income will be 80 billion yen, less than half the October forecast of 170 billion yen, while the sales projection is unchanged at 7.7 trillion yen, Sony said.

“My responsibility is to turn around the electronics operation,” Hirai said yesterday. “I’d like to say this time’s reform is final but amid intensifying competition, reform may be needed going forward.”

Sony American depositary receipts advanced 3.9 percent to $16.52 yesterday in New York. The underlying shares rose 1.5 percent to 1,624 yen in Tokyo before yesterday’s announcement, narrowing the loss this year to 11 percent.

The company cited the costs of restructuring its TV and PC units for the revision to earnings.

Sony is taking charges of 70 billion yen this year, an increase of 20 billion yen from its October forecast, and also another 70 billion yen in the 12 months ending March 2015, it said. Annual fixed costs are forecast to fall by more 100 billion yen in the following year.

Samsung, LG

The world’s No. 3 TV maker kept its October sales forecast for 14 million liquid-crystal-display sets after cutting it from a projection of 15 million last year. TV operations will lose 25 billion yen this year, the company said, the 10th straight annual loss for the maker of Bravia sets.

The TV business has lost ground in a contracting market to put it further behind larger competitors Samsung and LG Electronics Inc. Sony’s share of global TV revenue fell to 7.5 percent in the third quarter last year from 8.1 percent the previous quarter, according to NPD DisplaySearch.

“Hirai lacks aggressiveness,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “Sony needs to produce a new field for growth in order to increase its value.”

Sony lowered its sales forecast for Xperia smartphones to 40 million units from an earlier projection of 42 million units. The company rose to No. 3 in global smartphone shipment revenue in the September quarter, according to data compiled by Bloomberg.

‘No Prospect’

A bright spot for the company has been its new PlayStation 4 game console, which sold more than 4.2 million units in the first six weeks after its November release, outpacing competing machines from Microsoft Corp. and Nintendo Co.

“There’s no prospect of its TV business being profitable,” said Makoto Kikuchi, the Tokyo-based chief executive officer for Myojo Asset Management Co. “Sony’s strengths are content such as games and movies. It cannot increase profit without moving its focus from TV production to content.”

Sony has been selling assets to generate one-time profit and said last month it began cutting jobs at its Hollywood film studio as part of $250 million in cost reductions after billionaire investor Daniel Loeb pushed for a spinoff of a portion of the entertainment unit.

Studio Profit

Third-quarter results reported yesterday showed a 4 percent decline in operating profit at the film and TV studio, to 24.3 billion yen. Sales advanced 7.1 percent to 208.9 billion yen, boosted by hit television shows such as “Blacklist” and expanded syndication deals.

Since the film unit posted a loss in the September quarter after “White House Down” flopped at the box office, Sony has found commercial and critical success with “American Hustle” and “Captain Phillips,” both of which garnered best-picture nominations at the Academy Awards. This year, Sony will release a sequel to 2012’s “The Amazing Spider-Man.”

In the music unit, Sony posted a 14 percent increase in revenue as operating profit advanced 32 percent to 21.7 billion yen. Beyonce’s surprise release in December sold 2.3 million units through year-end.

Sony reported total third-quarter net income of 27 billion yen in the three months ended Dec. 31 amid sales of the new PlayStation 4 console and a smaller loss in the unit that makes smartphones.

Sony’s long-term credit rating was cut to junk last month by Moody’s Investors Service, which cited the challenges of reviving the TV and PC units. Sony was already rated junk at Fitch Ratings, while Standard & Poor’s rates Sony at the second- lowest investment grade.

--With assistance from Takashi Amano in Tokyo. Editors: Terje Langeland, Robert Fenner