Sony cuts profit forecast as turnaround stalls

Even with strong sales of its PlayStation 4, the electronics company can't keep its predicted earnings estimates.

By TheStreet.com Staff May 1, 2014 12:32PM

A logo of Sony Corp is seen outside its showroom in Tokyo © Yuya Shino/ReutersBy Gary Krakow, TheStreet


Despite strong sales for its PlayStation 4 game console, solid reviews for new Xperia smartphones and desperate hopes of a corporate turnaround, Sony (SNE) cut its earnings estimates for the third time in a year. The Street on MSN Money
 
After markets in Tokyo closed for the day, Sony announced another revised earnings statement showing a net loss of 130 billion yen ($1.3 billion) for the year ended in March. In February, Sony announced the loss would be only 110 billion yen. Back in October, Sony was predicting a profit.
 
Sony shares were off 1.4 percent to $17.39 in early trading in New York.
 
Sony CEO Kazuo Hirai had promised better results. He was hoping his company's new gaming devices, digital cameras and Android smartphones would help offset continuing dismal sales results for its other consumer electronics businesses such as DVD/Blu-Ray players and disc manufacturing, flat-screen TVs and Vaio PCs. 

Instead, his company is looking at full-year operating income of 26 billion yen or less than one-third of his 80 billion yen prediction earlier this year. That's despite a nearly 1 percent rise in overall sales over earlier estimates.

Industry experts believe Sony needs to drastically cut costs to survive. The company has already announced big layoffs in its entertainment division and is reportedly looking for someone to either buy or help bail out its computer division. The company was forced to take another 30 billion write-down because of further eroding sales. Sony is reportedly in talks with Japan Industrial Partners about its PC business. It's looking for a sale by this start of the summer. 

Analysts hope Sony can arrange something similar for its TV hardware and electronics businesses as well.

Sony's disc manufacturing arm is the other big trouble spot. Not many people are buying DVDs or Blu-Rays any more. The world is now dominated streaming services such as Netflix (NFLX), Apple (AAPL) iTunes, Hulu and others. The decline of disc sales in North America is bad but it's much worse in Europe, which had been a huge profit center for Sony disc sales.

Sony has also sold a number of real estate holdings including office buildings in Tokyo and its U.S. corporate headquarters at 550 Madison Avenue in New York.

On the brighter side, Sony said it has sold more than 7 million of its PlayStation 4 game consoles and 20 million PS4 games in the first five months. Compared to rival Microsoft's (MSFT) Xbox One sales (5 million units and 1.4 million games), the PS4 gives Sony something to brag about.

The company plans to release its full earnings report and an updated forecast in two weeks.


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2Comments
May 1, 2014 8:15PM
avatar
One minor correction Sony sold through to consumers over 7 million consoles while MS only shipped to retail 5 million XB1's. There is a difference.  
May 1, 2014 1:02PM
avatar
Well ,build quality,serviceable electronics,that doesn't cost an arm and leg to repair.Good equipment that stands out from others with technical support to back it up!
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