Sony doubles forecast of annual loss to $6.4bn and planning 10,000 job cuts

[Vandole]

Sony has forecasted an annual loss of $6.4bn, double its previous estimate and a record loss for the firm.

The grim forecast comes as Sony's new chief executive, Kazuo Hirai, prepares a turnaround plan, which he is expected to outline on Thursday.

Reports say the company is planning 10,000 job cuts as Sony exits businesses that are not profitable or central to the firm's strategy.

The company blamed the record loss on tax charges related to its US business.

It will be the company's fourth year of losses.
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Analysis
image of Roland Buerk Roland Buerk BBC News, Tokyo

On the face of it Sony's problems are simple, but fixing them will be a challenge for the new chief executive, Kazuo Hirai.

The content and device divisions of the company have not been able to work out how to create one seamless consumer experience.

Apple has trounced the maker of the Walkman by doing exactly that.

In televisions Sony faces brutal competition from the likes of Samsung, with the high yen giving companies based in Japan a distinct disadvantage.

In its latest forecast, Sony said it still expects to make an operating loss of $1.2bn for the year to 31 March, but hopes to return to profit in the current financial year.

Sony's performance has been dragged down by its television business which has lost money for eight years.

Analysts will be keen to hear what the new chief executive has planned for that unit.

"The interesting question is: What number of TVs do they expect to sell in the future?" said Pelham Smithers, who runs his own consultancy that specialises in electronics firms.

"Selling around 20 million units a year is too small to be price competitive and too big to be a niche player," he told BBC News.

Rival Japanese TV maker Sharp is also forecasting hefty losses.

It expects an annual loss of $4.7bn, up from its initial forecast of $3.6bn.

Sharp and Sony have been struggling to compete with South Korea's Samsung and LG who both have profitable TV units.

http://www.bbc.co.uk/news/business-17662059

[Dimmauk]

2 out of 3 TVs in my house are sony. My ps3 is hooked up to one of them. What's wrong with the vita? I was playing with my nephews on Easter and it was nice.

[Cephius]

My personal experiences invalidate the facts presented in this article!

Right on, brother.

[Dimmauk]

Right on, brother.

LOL

[Senji]

December 27, 2011

Samsung Buying Sony's 50 Percent Stake in Joint LCD Venture

Sony is ending its LCD panel manufacturing venture with Samsung, the company announced on Monday.

In an effort to help its foundering TV business, Sony will sell to Samsung its stake in S-LCD, the jointly owned manufacturer the two companies established in 2004. S-LCD will become a wholly owned subsidiary of Samsung, Sony said. Samsung will pay Sony 1.08 trillion Korean won, or $935 million to buy out Sony's 50 percent stake.

As a result, Sony said it will take a third quarter loss of about 66 billion yen, or $845 million. However, the company predicted that its exit from the LCD business will result in savings of about 50 billion yen ($642 million) each year.

Sony said its transaction with Samsung will be complete by the end of January.

Sony isn't leaving the manufacturing business behind entirely. As the New York Times noted, the company still has a 7 percent stake in a joint venture with Sharp.

However, as Sony pulls out of its partnership with Samsung, the two firms are setting up a "new strategic agreement for the supply and purchase of LCD panels with a goal of enhancing the competitiveness of both companies." Sony did not divulge the details of this deal, beyond stating that it "aims to secure a flexible and steady supply of LCD panels from Samsung, based on market prices and without the responsibility and costs of operating a manufacturing facility."

Between earthquake, Thai floods, yen, ps3 hack debacle, developing vita, the tax issue, and being Samsung's bitch for 8 years, yeah..

[solanis]

deja vu to HP last summer.

[Mizango]

Who'lotta mayad up in hurr. Vita is da best

[Mazmaz]

I believe the correct title would've been "SONY IMPLODES: Misses Revenue, Cuts 10000 Jobs"

[Correction]

That doesn't look like a $3000 $4000 $6000 3D HDTV...

[Acevalefor]

It's because of Geohotz!

And what is this tax thing they speak of? I thought American corporations didn't pay taxes....

[Senji]

Why Sony’s £4 billion loss isn’t the disaster it seems

Sony announced a £4 billion annual loss today, filling the PlayStation doom-sayers’ guns with some monumental ammo. Don’t call the firing squad just yet, says Rob Fahey. The round you’re polishing is a dud.

When former PlayStation boss Kazuo Hirai took over as head of Sony recently, journalists around the globe reached for their Big Book of Cliches. He had, apparently, a mountain to climb. He was confronted with a huge task. It would be an uphill struggle. There was a long road ahead. In summary – Sony’s a bit screwed right now, and Hirai’s going to have to make a lot of very tough and very clever decisions if he’s going to unscrew it.

Today, we discovered the real scale of the problems Sony faces – or, to continue the tortured metaphors, just how high the mountain, how long the road, and how steep the hill that Hirai faces actually is. As widely reported, Sony has just revised its forecasts for the 12 months ended March 31st 2012, and now stands to lose a whopping 520 billion Yen (about £4 billion) for the year.

That’s a lot of money. Except that I want to sound the first note of caution – it’s actually not a lot of money. Yes, £4 billion would buy you a fair few fish suppers, but I say “it’s not a lot of money” because the reality is that it never actually existed. Sony didn’t have four billion quid and then lose it. The accounting behind this figure is a bit more complex.

Sony had what are called “deferred tax assets” in the United States. These are essentially agreements with the US government which would allow the company to enjoy tax credits on its future income. Because of how corporate accounting works, they’re buried somewhere in Sony’s labyrinthine balance sheet as a great big asset – even though they don’t actually exist yet, since they’re just a promise to give the firm tax credits at some point in the future. For various reasons (largely, I believe, the fact that the company isn’t making enough money to actually use those credits), they’re no longer usable, so they have to be taken off the balance sheet – and that means the accountants have to register them as a “loss”, since they’re money (well, “not-money”) disappearing off Sony’s books.

I don’t pretend to understand the full detail of what’s happening here – if I fully understood the intricacies of multi-billion-dollar corporate tax regimes, I think I’d be in a very different career (and live in a very different house, for that matter). However, the bottom line is this – Sony never actually had the ¥300 billion it just “lost”. It looks bloody awful for the company, but it’s an accounting blip rather than a fresh indication that Sony is doomed.

Unfortunately for Kaz Hirai’s hiking boots, though, the mountain that’s left to climb is still pretty steep. The company’s ¥520 billion loss this year will be its worst ever – but even if you take out the ¥300 billion charge from this US taxation peculiarity, you’re still left with a ¥220 billion loss, or a little over £1.7 billion. That’s admittedly a little bit better than last year, when the company lost ¥260 billion – but last year, Sony actually had an operating profit (which is a better way of evaluating whether a firm’s core business is actually making money) of ¥200 billion. This year, it made an operating loss of ¥95 billion, which basically means that its actual business activities – making stuff and selling it – lost a vast amount of money in 2011.

Sony tried to soften the blow today by announcing that in the coming year, they’re going to make a ¥180 billion operating profit – although they didn’t say what would happen to the firm’s sales, which fell nearly 11% in 2011 compared with 2010. If I were to guess, though, I’d say that Hirai would probably be comfortable with a smaller, leaner Sony that can actually make a profit. He’s going to announce his plans for the company soon, but we’ve already heard that 10,000 job cuts are imminent. The rumour in Japan is that the axe will fall hardest overseas, and that’s a bit worrying, because it might suggest that Hirai doesn’t have what it takes to face down Sony’s powerful Japanese executives – the executives who have stubbornly kept the company deeply committed to areas where it can’t possibly hope to make a profit any more, like portable music players and television sets.

Squeezed between hugely powerful and successful rivals – Apple, Samsung, Microsoft and a host of others besides – and under pressure from a historically strong yen which makes it hard to turn a profit overseas, Sony’s challenges are mounting up. The company’s first foreign CEO, British-born Sir Howard Stringer, tried to bring in sweeping changes – but failed to turn the company around. Hirai is younger, deeply versed in the company’s successes with PlayStation, and his education and experience is truly international. He’ll need all of that and more if he’s going to turn Sony, the company which once inspired a young Steve Jobs to emulate it with his fledgling computer manufacturer, into a success story once again. Today’s £4 billion loss is eye-watering stuff, but don’t let it distract you from the reality – the problems at Sony run much, much deeper than its balance sheet. Hirai shouldn’t be losing much sleep over the ¥300 billion taxation charge that’s caused so many headlines; but then again, he shouldn’t be sleeping too soundly in the first place.

http://www.vg247.com/2012/04/10/why-...ster-it-seems/

[Cephius]

It's because of Geohotz!

And what is this tax thing they speak of? I thought American corporations didn't pay taxes....

It's complicated, but Sony and the US had deferred tax assets that are no longer valid. Basically the US said "we're going to give you tax credits in the future on X" and Sony uses that to write things off and help post profits. Well now with the way things are, the US reneged on that and said "um yeah, we're broke and not giving you any tax credits after all, sorry!" (or maybe theyre just not valid anymore, who knows). Because they wrote stuff off earlier they have to post those credits as a loss which is why they have such a horrible margin in these stories. I'm sure I butchered part of that explanation but that's the best way I can think to frame it.

[Drex]

They had a coupon for ~$2.3 billion off their future taxes that is no longer valid because of a change in their accounting system. That's all. No actual cash lost.

I don't know the specifics behind this specific write-off, but generally a situation like this happens because their previous accounting system earned them the benefit in the first place. Since they are changing systems, they are no longer entitled to the benefits they acquired under the old system and have to adopt the new system cold turkey.

[hey]

No actual cash lost.

This year, it made an operating loss of ¥95 billion, which basically means that its actual business activities – making stuff and selling it – lost a vast amount of money in 2011.

It's no $6.4B loss, but still not insignificant.

[Acevalefor]

It's complicated, but Sony and the US had deferred tax assets that are no longer valid. Basically the US said "we're going to give you tax credits in the future on X" and Sony uses that to write things off and help post profits. Well now with the way things are, the US reneged on that and said "um yeah, we're broke and not giving you any tax credits after all, sorry!" (or maybe theyre just not valid anymore, who knows). Because they wrote stuff off earlier they have to post those credits as a loss which is why they have such a horrible margin in these stories. I'm sure I butchered part of that explanation but that's the best way I can think to frame it.

Thanks for that. I was kind of being facetious with the tax thing in reference to GM's whole tax debacle where Obama touted them as a great example of fair accounting and taxes only to have GM not pay anything in taxes last year. Probably because of the same kind of deferred tax credit deal that Sony no longer has...

[archibaldcrane]

It's no $6.4B loss, but still not insignificant.

Sure, but it's because they keep propping up their TV production department, which hasn't turned a profit in 7 years now (despite having some of the best on the market). I love my new 46" Sony 3D LED.

Sent from my Samsung Galaxy S 4G using Tapatalk

[Salodin]

I thought opportunity cost was important? Sure they didn't actually lose money from their savings, but they still did lose billions of yen that they can't use in the future.

[Pirian]

I thought opportunity cost was important? Sure they didn't actually lose money from their savings, but they still did lose billions of yen that they can't use in the future.

No one is saying that it isn't important. They're just saying that the number is so large because they had to write it all off as a loss in one go, when it was likely that they were going to benefit from a tax incentive that large over the course of 10-15+ years.

[Mazmaz]

So it's no actual cash lost, but they're cutting 10k jobs?

[Cephius]

So it's no actual cash lost, but they're cutting 10k jobs?

No, they still lost a lot of money. It's just not actually going-to-go-bankrupt-at-this-rate bad as it seems.