Sony Corp. blamed weak sales of TVs and digital cameras in the United States for its record group net loss, but analysts say there are bigger factors behind the company’s chronic deficits.
"There are major problems with the company's structure," said an official at a major credit rating agency.
Sony on April 10 revised downward its financial projections for fiscal 2011 for the fourth time.
The company in February estimated its net loss at 220 billion yen ($2.7 billion), but that figure was revised to 520 billion yen, exceeding its previous record loss of 293.3 billion yen set in fiscal 1994.
The loss increment was attributed to the poorer-than-expected business performance of Sony's U.S. arm in fiscal 2011, which forced the company to write down its deferred tax assets.
U.S. sales of Sony products were sluggish during the Christmas shopping season, which is said to account for more than 20 percent of annual domestic consumption in the country.
Televisions, Sony's mainstay products, also saw weak sales with the continuing emergence of South Korea's Samsung Electronics Co. and other competitors. The yen's appreciation to less than 80 yen to the dollar further eroded Sony’s profitability.
The company had hoped to turn mirrorless single-lens cameras into a new "main player" to replace its sluggish TV sector. But the cameras ran out of stock following the flooding in Thailand last autumn and failed to bring in revenue.
"We take our management responsibility very seriously," Masaru Kato, Sony's chief financial officer, said at a news conference on April 10. "The deficit in the TV sector presents the biggest management challenge. We hope to turn it into a profit in fiscal 2013."
Kato said a combination of external factors also contributed to the record loss projection of 520 billion yen.
"The Great East Japan Earthquake, the ultra-strong yen and the flooding (in Thailand)--so many factors contributed to the situation," he said.
Sony’s previous record loss in fiscal 1994 was mostly caused by a 265.2-billion-yen deficit from Sony Pictures Entertainment Inc., a subsidiary in charge of movie operations. Sony's mainstay businesses, including TVs, were robust at the time.
The situation is different now.
The TV sector alone is expected to have run an operating deficit of about 230 billion yen. The additional loss of 300 billion yen, announced on April 10, is also largely due to the sluggish TV sales.
The TV business has posted operating losses for eight straight years.
"That appears to have turned into a chronic disease," a senior official at a major electronic appliance manufacturer said.
But an analyst at a foreign-affiliated securities house said Sony is having difficulty emerging from the red because of its top-heavy structure.
"Sony spends too much on administrative and other sectors in comparison to Samsung and other rivals,” the analyst said. “It is so structured that it can no longer post profits, no matter how many TVs and digital cameras it may sell."
Sony has come up with a succession of downsizing plans, including the sale of its chemical businesses and about 10,000 job cuts, since it decided in February to appoint Kazuo Hirai as company president and CEO as of April 1.
A briefing session on Sony’s management policy is scheduled for April 12, when Hirai will present his plans to turn the streamlining measures into growth.
(This article was written by Junichiro Nagasaki and Takashi Kamiguri.)
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