Sony stumbles as demand wanes; slashes profit outlook
TOKYO (Reuters) - Sony Corp slashed its forecast for 2012/13 operating profit and lowered its sales expectations for key products including its handheld PSP and PS Vita devices as new boss Kazuo Hirai battles to revive the fortunes of the electronics giant.
Sony reported on Thursday that operating profit for April-June fell a much steeper-than-expected 77 percent to 6.28 billion yen ($80 million) compared with a year earlier. Analysts had penciled in a 36 percent fall in profit.
In a further sign of its struggle to appeal to consumers in the face of competition from the likes of Apple Inc, Samsung Electronics Co Ltd and Microsoft Corp, Sony cut some projections for product sales for the year to March 2013.
It expects to shift 15.5 million TVs, down from a May projection of 17.5 million, reflecting the waning demand for televisions that pushed rival Sharp Corp into a 94 billion yen operating loss ($1.2 billion) for the June quarter.
Sony expects handheld device sales of 12 million, instead of 16 million, although it maintained a forecast for 16 million sales of the PlayStation games console.
Citing exchange rate moves and a weak global economy, Sony cut its forecast for operating profit in 2012/13 to 130 billion yen from a previous forecast of 180 billion yen.
That moved the company more into line with market thinking. The consensus forecast of 18 analysts surveyed by Thomson Reuters is for annual operating profit of 139 billion yen.
In the year ended March 31 this year, the company had posted an operating loss of 67 billion yen and a record net loss of 455 billion yen. Its June-quarter net loss was 24.64 billion yen.
Taking the helm at Sony in April, Hirai vowed to revive the fortunes of the maker of the Walkman music player after years of competition from foreign rivals overturned its dominance in consumer electronics.
Hirai now faces the challenge of steering his limping corporation through a euro zone debt crisis that is denting global demand for consumer electronics and eroding the profitability of Sony products.
Sony said it was now assuming a yen rate of 100 per euro in its foreign exchange projections for the year, against a May view that the rate would be around 105 yen.
It kept to a dollar/yen assumption of 80 yen.
"I don't think we have to worry too much about the U.S. dollar, but the real worry is the euro zone," said Yuuki Sakurai, CEO of Fukoku Capital Management, the asset management unit of Japan's Fukoku Mutual Life Insurance.
"We'll have to fasten our seatbelts and get ready for the turbulence," Sakurai said before Sony released its results. Hirai "is in a tough position, I don't envy him."
The evaporating value of the euro hurts all Japanese companies that sell their goods and services in Europe, but Sony is more sensitive to yen swings against the common currency than its local peers.
Sony's European sales account for a fifth of all revenue compared with a tenth at both Panasonic Corp and Sharp.
A one-yen gain in the exchange rate against the euro cuts 6 billion yen off of Sony's operating profit. For Panasonic, a similar change would cut only 2.5 billion yen, and for Sharp, no more than 500 million yen.
The average against the dollar during the first quarter was 80.1 yen with the euro at 102.9 yen. The euro since has eroded in value to its lowest in more than a decade to around 95 yen.
In April, Hirai outlined a revival plan that stakes Sony's future on mobile devices such as the Xperia smartphone, gaming and digital imaging, while developing new businesses, including a medical unit.
So far, however, he has failed to convince investors a turnaround is imminent for the company behind the Bravia TV and Vaio laptop brands. Since he moved into the CEO office, Sony's shares have tanked by more than two-fifths.
"Sales volume in the smartphone and game business seems to be making little progress toward guidance targets," Takashi Watanabe, an analyst at Goldman Sachs in Tokyo said in a report before the results.
The loss posted by Sharp, Japan's last big maker of liquid crystal displays for TVs, was much deeper than the 44.4 billion yen shortfall that had been expected by analysts.
The maker of the Aquos TV brand said it would cut about 5,000 people -- about one-tenth of its workforce -- as it struggles, like Sony, with weakening global demand for TVs and competition from rivals led by Samsung Electronics.
(Additional reporting by Reiji Murai: Editing by Neil Fullick)
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