Sony Corp. (6758) plunged in Tokyo trading
after unexpectedly forecasting an annual loss, the sixth in
seven years, casting further doubt on Chief Executive Officer
Kazuo Hirai’s ability to revive the company.
Sony shares fell 6.1 percent, the most since Nov. 1, to
1,695 yen at the close in Tokyo. UBS AG cut Sony to a sell
rating, and Goldman Sachs Group Inc. lowered its share-price
estimate for the company.
Hirai, who cut last year’s net-income forecast three times,
is trying to overcome slumping demand for the TVs and personal
computers that underpinned Sony’s rise into a Japanese
electronics icon. The company, which is cutting 5,000 more jobs
and selling assets as it searches for new hits to build on its
success with the PlayStation 4 game console, expects 135 billion
yen ($1.3 billion) of costs related to restructuring and exiting
the PC business this year.
“If Hirai were in the U.S., shareholders would call for
his resignation,†said Yasuaki Kogure, chief investment officer
at Tokyo’s SBI Asset Management Co., which holds Sony shares.
“Hirai will say he needs time, but the market can’t wait. There
will be growing concern about his ability.â€
The net loss will probably be 50 billion yen in the 12
months ending March, the Tokyo-based company said in a statement
yesterday. That compares with the 57.1 billion-yen profit
average of 19 estimates compiled by Bloomberg and a 128.4
billion-yen net loss the year earlier.
TV Lineup
Operating profit, or sales minus the cost of goods sold and
administrative expenses, will probably be 140 billion yen this
year, the company said. That compares with the 231.8 billion-yen
average of 21 estimates compiled by Bloomberg and a 26.5
billion-yen profit a year earlier. The company is forecasting
annual sales of 7.8 trillion yen.
The larger operating loss is a result of Hirai’s
restructuring efforts, said Daniel Ernst, an analyst at Hudson
Square Research in New York. Because Sony has fewer products to
sell, it needs fewer people in sales and has to pay large
severance packages, particularly in Europe, he said.
“The question is, do you believe next year has to be
better?†Ernst said in an interview. “It’s certainly
understandable after six or seven years of restructuring that
the market does not have that patience.â€
PC Losses
Sony expects to book an 80 billion-yen loss at the PC unit,
which includes 36 billion yen in losses related to leaving the
business, the company said. Sony previously agreed to sell its
PC division, which produces notebooks under the Vaio brand, to
buyout firm Japan Industrial Partners Inc.
“The high cost to exit PCs shows that it will be even
harder for Sony to exit TVs,†said Yasuo Nakane, an analyst at
Deutsche Bank AG in Tokyo. “The TV sales target and smartphone
sales target are too bullish and may not be achievable.â€
Sony said it expects to sell more so-called 4K ultra high-definition TV sets. Global sales may get a boost in demand from
the upcoming soccer World Cup in Brazil.
When Hirai took over as CEO in 2012, he said Sony’s revival
would be driven by games, imaging products and mobile devices.
Since then, the company has announced job cuts and a
restructuring to make TV manufacturing a separate unit. Hirai
has trimmed the TV product lineup to focus on larger-screen
models.
Ryosuke Katsura, an analyst at UBS, cut Sony’s rating to
sell from neutral, according to a note today. Goldman Sachs
analysts including Takashi Watanabe lowered their price target
for the company to 1,900 yen from 2,000 yen.
Gracenote Sale
Sony also sold its Gracenote audio-recognition software
business to Tribune Co., as well as stakes in Japanese satellite
broadcaster SKY Perfect JSAT Holdings Inc. and game maker Square
Enix Holdings Co.
“The biggest challenge for Sony is whether it can change
its high corporate cost structure,†Chief Financial Officer
Kenichiro Yoshida said yesterday. “Electronics are a high
volatility business; we need to bring the volatility down.â€
The 53-year-old Hirai also pledged to make Sony’s TV-manufacturing unit profitable, a business that has now lost more
than 790 billion yen over the past 10 years, the company said
yesterday.
Sony expects sales this year of 16 million LCD TV sets, 8
million cameras, 17 million game consoles and 50 million
smartphones, it said.
“We see some downside risk to the firm’s sales volume
forecasts for the TV and mobile products,†Mika Nishimura, an
analyst at Mitsubishi UFJ Morgan Stanley Securities Co., said in
a report yesterday. “We think additional measures will be
needed to prevent earnings deteriorating over the medium term,
and we await swifter action from management.â€
Spider-Man
“The Amazing Spider-Man 2,†the biggest release this year
for Sony Pictures, has generated more than $146 million in U.S.
box-office receipts in two weeks, although it was ousted from
the top spot after just one week, according to researcher
Rentrak Corp. Sony has additional sequels set for 2016 and 2018.
The company today also announced it has optioned the film rights
to a book based on Edward Snowden, who leaked confidential
documents about U.S. National Security Agency surveillance
activities.
“‘The Amazing Spider-Man 2’ is performing very well
overseas and that makes up for the fact that its grosses have
been a little underwhelming in North America,†said Phil Contrino, chief analyst at boxOffice.com.
Sales of the PS4 surpassed 7 million consoles as of April
6, the company said last month. The game machine has outpaced
Microsoft Corp.’s Xbox One, which had sold more than 5 million
units.
Bonus Return
Company executives will return their bonuses for the year
ended March, Yo Kikuchi, a spokeswoman for Sony said May 13. The
company also nominated four new external board directors, whose
appointments are subject to approval in June.
Sony controlled 3.8 percent of global smartphone sales in
2013, according to data compiled by Bloomberg from IDC. That
ranked the company sixth in the world and compares with about 31
percent for South Korea’s Samsung Electronics Co.
“Rivals in consumer electronics are recovering,†said
Masahiko Ishino, a Tokyo-based analyst for Advanced Research
Japan. “The net loss makes it clear that Sony is falling behind
others.â€
The company’s film unit has rebounded from a loss in the
September quarter after “White House Down†flopped at the box
office. Sony has found success with “American Hustle†and
“The Monuments Men,†and its studios ranked second in the U.S.
in the year through May 11 with about $535.7 million of gross
receipts, according to Boxofficemojo.com.
Music Division
The company is also testing an Internet-based pay-television service in the U.S. this year, bringing live and on-demand programming to TVs and its PlayStation consoles.
Forecast operating profit from the music unit, where best-selling artists the last year included Daft Punk and Miley
Cyrus, will decline 4.4 percent to 48 billion yen, Sony said.
One of Sony’s successful products has been complementary
metal-oxide semiconductors, known as CMOS sensors, that act as
digital eyes in smartphones and cameras made by Apple Inc. and
Samsung.
Sony said its assumptions for the yen’s exchange rate to
the dollar and the euro are 103 yen and 137 yen respectively.
To contact the reporters on this story:
Grace Huang in Tokyo at
xhuang66@bloomberg.net;
Marco Lui in Tokyo at
mlui11@bloomberg.net;
Takashi Amano in Tokyo at
tamano6@bloomberg.net
To contact the editors responsible for this story:
Michael Tighe at
mtighe4@bloomberg.net
Robert Fenner
Article source: http://blogs.artinfo.com/artintheair/2012/10/12/artinfo-uks-guide-to-frieze-week-weekend-edition/
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