For the first time in 14 years, Japanese Sony Corp. is likely to record an annual operating loss of around $1.1 billion in the current fiscal year due to weak sales and a stronger yen, claims a source familiar with the situation.
According to the source, who wished to remain anonymous, in the current fiscal year ending March 31, Sony could report an operating loss of 100 billion yen ($1.1 billion), instead of the previously forecasted profit of 200 billion yen. The business daily Nikkei previously reported that the loss could be doubled to around 200 billion yen, depending on inventory growth in the January to March quarter. By comparison, analysts had expected an average annual profit of 18.5 billion yen.
Due to the global economic crisis, there has been a decline in demand for electronic devices, resulting in a significant increase in inventory and a drop in prices. Sony is feeling the effects of the slowdown across all business segments. If the grim forecasts of a substantial operating loss materialize, management could find itself under pressure to implement a more extensive restructuring plan than the one presented last month, which announced a reduction in investments, withdrawal from certain business segments, and the elimination of 16,000 jobs, including 8,000 permanent employees, or four percent of the total workforce at the company.
Sony’s shares plummeted nine percent, reducing the company’s market value by two billion dollars to 22 billion. Its rival Toshiba Corp lost over eight percent in the value of its shares following news in Japanese media that it is also on track to record a significant operating loss in the current financial year. Sony spokesperson Mami Imada stated that these are speculations that she declined to comment on. Sony will release its quarterly earnings report on January 29. (H)
