Sony profits under pressure
The bleak outlook signalled tough times ahead for Japan’s electronics giants, who have enjoyed record profits in recent years helped by strong sales of flat televisions, cameras and mobile telephones.
Sony forecast a net profit of 150 billion yen for the financial year to March, down 59% from the previous year and much worse than an earlier estimate of 240 billion yen.
The stronger yen was the main culprit, reducing the value of Sony’s repatriated earnings.
The company said sales of televisions, compact digital cameras and camcorders were also weak "due to a deterioration in the market environment brought on by the slowing global economy and an intensification of price competition."
Operating profit is now estimated at 200 billion yen, much worse than a previous forecast of 470 billion yen. Revenue is expected to edge up just 1.5% from the previous year to 9.0 trillion yen.
The profit warning, Sony’s second in less than three months, followed a steep drop in earnings in the quarter to September.
Sony said its net profit plunged 72% to 21 billion yen in the second quarter of the financial year, based on preliminary figures. Operating profit dived 90% to 11 billion yen.
The steep fall was partly due to a slump in the Japanese stock market, which hit Sony’s financial services business. The year-earlier figure was also inflated by the sale of a portion of the site of Sony’s former headquarters.
Sony has endured a difficult few years in the face of tough competition from rival products such as Apple’s iPod and Nintendo’s Wii.
Last year it enjoyed a strong recovery under its first foreign boss, Howard Stringer, a Welsh-born US citizen. Under his watch, the group has shed non-core assets and axed thousands of jobs.
But its earnings are now being pressured by a weak dollar, slowing global economic growth and rising costs for raw materials. The Japanese yen has soared amid recent financial turmoil as investors unwind risky bets.
Troubles at the company’s joint venture Sony Ericsson have added to the woes. The Swedish-Japan mobile telephone maker plunged deep into the red in the third quarter with a net loss of €25 million euros.
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