TOKYO (Reuters) - Japan's Sony Corp will likely suffer an annual operating loss of about $1.1 billion, its first such loss in 14 years, due to sluggish sales and a stronger yen, a person with knowledge of the matter said.
Shares of Sony tumbled 9 percent, slicing $2 billion off its market value to $22 billion, while rival Toshiba Corp dropped more than 8 percent after Japanese media said it too was headed for a big loss this financial year.
The global economic slump has dampened demand for electronics products, causing inventories to pile up and prices to tumble, and Sony is feeling the pinch of the downturn in every corner of its operations, which range from semiconductors to movies and insurance.
If it posts such a loss, management could come under pressure to pursue bolder restructuring than the plan unveiled last month that called for curbing investment, exiting businesses and cutting 16,000 jobs. That included 8,000 regular workers, or roughly 4 percent of its global workforce.
"I think there's a good chance the company will further accelerate its restructuring from what has been announced in December," said Daiwa Institute of Research analyst Kazuharu Miura.
Sony will likely need to pursue more drastic measures, such as laying off more full-time employees and selling its financial unit which has been hurt by falling stock prices, market participants say.
Sony may post an operating loss of 100 billion yen ($1.1 billion) in the business year to March 31, instead of its previously estimated 200 billion yen profit, said the source, who spoke on condition of anonymity because Sony has not yet revised its forecasts.
The Nikkei business daily had reported earlier that the loss could double to around 200 billion yen depending on the extent of inventory build-up in the January-March quarter.
Analysts on average see an annual profit of 18.5 billion yen, a poll of 18 brokerages by Reuters Estimates showed.
Sony spokeswoman Mami Imada said the loss figure was speculation and declined to comment further. Similar reports appeared in other media. The company is scheduled to announce its quarterly earnings results on January 29.
The severe downturn has also pushed rival Panasonic Corp to slash its outlook and step up restructuring measures, while media said Toshiba would likely plunge into an annual operating loss for the first time in seven years because of its deteriorating chip business.
The Nikkei newspaper said Toshiba's operating loss will likely be around 200 billion yen, against the company's October forecast for a 150 billion yen profit and a projection of a 31 billion yen profit in a poll of 16 brokerages by Reuters Estimates. Toshiba also suffers from weak demand for flat TVs and personal computers.
Toshiba spokeswoman Kaori Hiraki said the loss estimate was not issued by the company, which is still reviewing its earnings forecasts.
Sony, the maker of Bravia flat TVs, Cyber-shot digital cameras and PlayStation game machines competes with Samsung Electronics in TVs, Canon Inc in digital cameras, and Microsoft Corp and Nintendo in video games.
Some analysts have predicted Sony will post an operating loss in the current year to March 31 while Sony itself had said in October that it may fall short of its forecast for a 200 billion yen profit due to the yen's strength.
But the news has nevertheless fueled speculation that Sony may have to undertake further restructuring steps as its $1.1 billion savings plan has been seen as insufficient.
"Sony could reduce the number of products it offers, and it may also have to consider selling off its financial unit," JPMorgan analyst Yoshiharu Izumi said.
"Even though external factors are the main reason (for the likely loss), the management team is partly the cause for the long delay in turning around its TV business," he added. "They may have to take responsibility for that since the company is cutting personnel now."
The Times of London newspaper said earlier this month that Sony planned to announce closures of Japanese factories and major divisions next month, though the company denied any such plan existed.
The expected loss this business year would be only the second since Sony went public in 1958 and the first caused by troubles in its mainstay electronics business, the Nikkei said.
A one-time charge related to the company's U.S. film studio business was primarily responsible for the previous operating loss, reported for the year that ended in March 1995, it said.
Apart from restructuring charges and possible further losses on exchange rates, Sony is expected to write down roughly 50 billion yen of its holding in Sony Life Insurance Co, the newspaper said.
The company has assumed the yen at 100 yen per dollar and 140 yen per euro, compared with the current dollar/yen level of 89 yen and euro/yen level of 119 yen. A firm yen cuts into the value of its profits and makes its products less competitive in overseas markets.
Sony shares ended down 8.9 percent at 2,000 yen, compared with a 4.8 percent slide in the benchmark Nikkei average. The company's shares fell 1.9 percent to $23.10 on the New York Stock Exchange on Monday.
Toshiba closed down 8.6 percent at 385 yen.