Sony Projects Huge Loss on Strong Yen, and Natural Disasters

Sony Projects Huge Loss on Strong Yen, and Natural Disasters

Sony Projects Huge Loss on Strong Yen, and Natural Disasters

Losses at  Sony Corporation (NYSE:SNE)  are projected to be more than double previous estimates. Already suffering due to a strong yen and huge losses in their television business, as well as damage caused by natural disasters, Sony now faces additional tax expenses.

 At a news conference held at Sony headquarters the company projected a loss of ¥520 billion for the past financial year. Rumors of cutting 10,000 jobs were not confirmed. However, Masaru Kato, chief financial officer at Sony, did say all possibilities must be considered if the company is to bounce back into a position of profitability.

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 The projected losses highlight the serious challenges Kazuo Hirai, who just stepped into the position held by Howard Stringer this month, is up against. Sony, a former leader in the technology industry, is now a mere shadow of what it once was. The problems faced by the company reflects the overall decline of the consumer electronics industry in Japan.

Sharp announced losses for the financial year ending March, 2012 are expected to be ¥380 billion, much worse than the ¥290 billion previously projected.

 But, the losses at Sony are the most spectacular. The decline of the company became serious when it was unable to duplicate its success with the Walkman with modern portable players. The television division suffered greatly by falling behind in the development of flat screen models and from harsh, low cost competition.

 Mr. Kato blamed slow sales, especially in the U.S., the company’s largest market, a strong yen and lingering effects of the tsunami for the decline in profits. The most recent losses, however, were caused by an additional ¥300 billion tax expense.

 The biggest challenge Sony faces in its restructuring plans is reducing its enormous workforce. The company employs approximately 168,000 people worldwide, the bulk of which are in Japan. Due to strict labor laws, cutting jobs in Japan is nearly impossible.

 Another challenge the company must overcome will be bringing its entertainment properties together with its electronics. Top Sony executives have long believed that combination is needed to help differentiate Sony electronics from the rest.

 Analysts believe Sony should focus on its strengths, such as its entertainment products and video game consoles, and abandon other electronics, like televisions where it can no longer be competitive. Mr. Hirai, however, maintains Sony is not ready to give up on this central and time-honored portion of the company.

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