twice connect
careers

Sony Posts Losses, Outlines TV Realignment

11/02/2011 09:58:01 AM Eastern
Tokyo - Sony reported a net loss and lower sales in its fiscal second quarter, projected a $1.2 billion loss for its fiscal year, and provided details on the realignment of its TV operations.

The company blamed its problems on three areas: foreign exchange rates for the yen; lower LCD TV sales and profitability; and, for the entire fiscal year, the impact that the floods in Thailand will have on its consumer and professional products businesses, especially digital cameras.

Sales and operating revenue for the quarter, ended Sept. 30, was 1,575 billion yen, or $20.5 billion, down 9.1 percent year on year. The net loss was 27 billion yen, or $350 billion, compared with net income of 31.1 billion yen year on year.

Sony said the operating loss of 1.6 billion yen, or $21 million, compared with operating profit of 68.7 billion yen last year was due to a decrease in gross profits due to lower sales in LCD TVs.

In the consumer products and devices segment, consisting of TVs, Vaio PCs, and PlayStation game systems, sales were down 12.3 percent to 779.7 billion yen, or $10.1 billion, year on year. The operating loss was 34.6 billion yen, or $449 million, compared with the prior year's 1 billion yen profit.

Excluding restructuring charges, the operating loss for the segment, which included LCD TVs, reflected a decline in unit selling prices that exceeded cost and expense reductions, the game business, and PCs -- reflecting lower sales as noted above. Operating loss included additional LCD panel-related expenses resulting from low-capacity utilization of S-LCD as well as the above-noted asset impairment of 8.6 billion yen, or $112 million,  associated with LCD television assets, Sony said.

Sony is now projecting a net loss of 90 billion yen for the fiscal year ending March 31, 2012, as compared with a July forecast of a 60 billion profit and an actual loss of 259.6 billion yen in the prior fiscal year.

Sales and operating revenue is now forecast at 6,500 billion yen, down from the July forecast of 7,200 billion yen and 9.5 percent down from the prior fiscal year's actual results.

Sony said it is changing its TV operations from a target of 20 percent market share and 40 million unit sales by the fiscal year ending March 31, 2013, due to economic conditions in the U.S. and Europe and a surplus of LCD screens.

As of yesterday, Sony said in a statement it is separating its TV business organizational structure from one business unit into three.

·         The first unit is the "the legacy LCD TV business area" focused on enhancing products through internal design and manufacturing.

·         The second unit is the third-party original design and manufacturing (ODM) area that makes products at a low cost through external design and manufacturing.

·         The third unit is developing and designing the next-generation TV. Upstream processes are also being strengthened by consolidating the marketing and product strategy functions.

Sony will incur additional charges of approximately 50 billion yen to return the TV business to profitability by March 31, 2014, and transform its operations to "a 20 million unit structure."

This will primarily be due to impairment charges relating to machinery and equipment, as well as costs related to reducing the number of models. Following this realignment in the TV product category, Sony expects to record sales of 875 billion yen and an operating loss of 175 billion yen in fiscal year 2011, once the 50 billion yen charges have been recorded.

According to a Sony statement, the TV restructuring includes the reduction of LCD panel costs (about 40 percent of total improvement), and enhancing product competitiveness and reforming operations to improve marginal profit (approximately 30 percent of total improvement).

In developed countries, the restructuring will focus on improving model mix ... resulting in further profitability improvement.

In supply-chain management, new systems are being introduced with the aim of reducing inventory turnover by a further 10 days in fiscal year 2012. The restructuring will also include deploying unique technology, such as super-resolution high image quality engines and accelerate the development of a next-generation TV, Sony said.  It will also increase the added value of TV by providing consumers with an integrated user experience across multiple devices and network services, reduce SG&A at sales companies, and improve R&D and indirect costs (approximately 30 percent of total improvement).
Want to read more stories like this?
Get our Free Newsletter Here!

Curated By Logo