Thursday January 29, 12:17 PM
Sony logs quarterly loss as demand cools
By Hiroshi Hiyama
TOKYO, Jan 29, 2009 (AFP) - Japan's Sony Corp (Munich: SON1.MU - news) . reported Thursday a 200-million-dollar operating loss for the fiscal third quarter because of weak sales of electronic goods and a stronger yen.
The Japanese company said it remained on course for its biggest ever operating loss in the full financial year to March, and left the door open to further job cuts on top of the 16,000 already announced.
Sony's chief financial officer Nobuyuki Oneda blamed "the rapid deterioration of the economy" and the rising yen for the poor results.
"The third quarter was particularly rough," he said.
The company posted an operating loss of 18.0 billion yen for the fiscal third quarter to December, a dramatic turnaround from year-earlier profit of 236.2 billion yen.
Net profit plunged 95 percent to 10.4 billion yen as revenue slumped 24.6 percent to 2.15 trillion yen.
As well as weak consumer demand and a rising yen, which is bad for export earnings, the group's financial arm was hit by the global stock market rout.
Sony continued to lose money on liquid crystal display (LCD) televisions despite an increase in the number sold, as fierce price competition and a stronger yen kept the division in the red.
Investors have been disappointed by the company's failure to return the division to the black despite repeated vows to staunch the losses.
"I admit we offered similar excuses last year," Oneda said, stressing the company's resolve to carry out reforms to end the red ink.
The company said it would delay the start of an LCD joint venture with fellow electronics giant Sharp Corp. by one year due to the economic crisis.
The failure of the television business to turn a profit is one of the biggest challenges facing Sony, analysts said.
"I am puzzled by why Sony's LCD TV segment has remained in the red for so long," said Kazuharu Miura, senior analyst at Daiwa Research Institute. "There is no end in sight."
Sony has put much effort and resources into restructuring its business, he said, begging the question: "Are they doing the right things?"
Chief executive Howard Stringer is slashing 16,000 jobs and axing plants as the company braces for a record operating loss of 260 billion yen in the full financial year to March.
Oneda did not rule out more job cuts, possibly including full-time engineers, if the business climate does not improve.
"We must adjust production and prices," he said.
The group logged an operating loss of 15.9 billion yen in its core electronics business in the third quarter, compared with a year-earlier profit of 200.6 billion yen, as revenue fell 29.3 percent.
The games unit suffered a 97 percent plunge in operating profit but avoided falling into the red thanks to efforts to reduce the manufacturing cost of the PlayStation 3, which faces strong competition from Nintendo's Wii.
Analysts said Sony, the inventor of the Walkman, may need to undergo more drastic restructuring to turn around its business in the face of the economic slump and competition from rival products such as Apple (NASDAQ: AAPL - news) 's iPod music player.
Sony (Xetra: SON1.DE - news) "is making drastic changes and restructuring efforts at factories and other areas that were once seen as difficult to change," said Osamu Hirose, senior analyst at Tokai Tokyo Research Center.
"But the question is, will it pay off? We have to see if their efforts really work."
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