Sony loss forecast hammers Japan's electronics shares

TOKYO Wed Apr 11, 2012 6:14pm EDT

A customer looks at Sony Corp's portable music players displayed at an electronic store in Tokyo April 9, 2012. Japan's Sony is to cut 10,000 jobs, about 6 percent of its workforce, the Nikkei newspaper reported, as new CEO Kazuo Hirai looks to steer the electronics and entertainment giant back to profit after four years in the red. REUTERS/Yuriko Nakao

A customer looks at Sony Corp's portable music players displayed at an electronic store in Tokyo April 9, 2012. Japan's Sony is to cut 10,000 jobs, about 6 percent of its workforce, the Nikkei newspaper reported, as new CEO Kazuo Hirai looks to steer the electronics and entertainment giant back to profit after four years in the red.

Credit: Reuters/Yuriko Nakao

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TOKYO (Reuters) - Shares of Sony Corp (6758.T), the inventor of personal music players, slid more than 7 percent on Wednesday after the company more than doubled its annual loss forecast, highlighting the plight of a Japanese TV industry that once dominated living rooms around the world.

Sharp Corp (6753.T), Japan's last big maker of TV liquid crystal displays, and local rival Panasonic Corp (6752.T), also fell.

Sony on Tuesday more than doubled its loss forecast to a record $6.4 billion, while Sharp added $1.24 billion to its loss estimate for the year to end-March.

Combined, Japan's three tech giants expect to lose $21 billion for the 12 months just ended, roughly the size of Sony's entire market value.

The three companies have been outgunned by more innovative rivals such as Apple Inc (AAPL.O) and Samsung Electronics (005930.KS), while a strong yen and tumbling TV prices have exposed a yawning performance gap with their foreign rivals.

Their current predicament could ironically draw some parallels to their 1980s heyday, when previously dominant U.S. consumer electronics makers such as Zenith struggled to make money amid low TV prices and were overtaken by a more cost-efficient Japan Inc.

Now, it is South Korean firms Samsung and LG Electronics (066570.KS) that lead the industry.

"Japan's consumer electronics industry is facing defeat," said Fujio Ando, senior managing director at Chibagin Asset Management. Even Wednesday's share battering is not enough to add appeal to Sony's stock, he added.

By around 0430 GMT, Sony shares were down 5.3 percent at 1,502 yen after earlier dropping to a 2-month low of 1,473 yen - on track for their biggest one-day fall since early November.

Sharp was 3.6 percent lower at 511 yen, with Panasonic down 2.5 percent at 654 yen. The main Nikkei average .N225 was down 1.2 percent.

GLUED TO SONY TVs

Investors' attention on Thursday will turn to Sony's plans for its ailing television business as new CEO Kazuo Hirai lays out his revival strategy. Media reports this week said Sony would cut 10,000 jobs - around 6 percent of its global workforce - as part of its turnaround bid.

"We still regard downsizing and product strategies worthy of the Sony brand as indispensable preconditions of any share price upside," Nomura Holdings analyst Shiro Mikoshiba wrote in a client note.

Hirai, who has vowed to get the division that makes Bravia TVs back to profit within two years, has insisted that television remains at the heart of a strategy for a seamless integration with mobile phones, tablet computers and other gadgets. He said in February he would widen the PlayStation gaming console online network to encompass all Sony's devices.

The company that took the TV market by storm with its Trinitron sets four decades ago, now expects a record net loss of 520 billion yen for the year ended March 31, hit by the write-off of tax credits that losses prevent it from using - a fourth straight year in the red.

While not an issue of core profitability - it kept its forecast for a 95 billion yen operating loss - it nonetheless raises questions about the company's financial standing by cutting its shareholder equity ratio to 15 percent from 17.2 percent at the end last year, according to Reuters data.

Sony's chief financial officer Masaru Kato said on Tuesday that equity finance was one option for Sony, but he added there are no current plans to raise cash.

"At the moment, Sony would not be sustainable without restructuring, and we recognise Sony is heading in the right direction with its efforts. In the meantime, we also need to confirm the depth of its restructuring going forward," Masashi Oda, general manager of the equity investment department at Sumitomo Mitsui Trust Bank, Sony's largest investor, said in an e-mailed reply to a Reuters query.

"We believe the revival of Sony entirely depends on the improvement of profitability in its core manufacturing business."

SHARP AND PANASONIC

Sharp, the maker of Aquos TVs, increased its full-year net loss forecast to 380 billion yen from a previous 290 billion yen, as it wrestles with ways to utilize more capacity at its $4 billion LCD plant in Sakai in western Japan amid a global glut of panels that has squeezed prices.

"We recognise that our outlook was optimistic," Tetsuo Onishi, an executive managing officer at Sharp, told reporters in Osaka on Tuesday.

In a bid to distance itself from losses at Japan's most advanced LCD plant, Sharp last month sold a 46.48 percent stake in the facility to Taiwan's Hon Hai Precision Industry (2317.TW), which also agreed to buy new Sharp shares worth 66.9 billion yen giving it an 11 percent stake in the Japanese company.

On Tuesday, it also revealed plans to further trim its stake in Sakai, saying it started talks with suppliers Toppan Printing (7911.T) and Dai Nippon Printing (7912.T) about selling more of the factory.

Panasonic has so far stuck to a February forecast for a record 780 billion yen net loss for the fiscal year just ended. Much of that red ink is the result of restructuring charges meant to put the sprawling electronics conglomerate on a firmer earnings footing.

Panasonic, which shed around 17,000 jobs in the business year, trimmed its forecast for the number of flat-screen TVs it sold by 1 million to 18 million sets.

By 2015, annual global sales of liquid crystal TVs will contract by 8 percent to $92 billion, according to flat panel industry research company DisplaySearch. Plasma sets, a market that Panasonic dominates, will shrink 38 percent to $7 billion.

Over 10 years, Panasonic has racked up a cumulative loss of 454 billion yen.

($1 = 80.9100 Japanese yen)

(Additional reporting by Dominic Lau and Mari Saito; Editing by Michael Watson and Alex Richardson)

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