* Sony cuts full-year profit forecast after Q2 net loss
* Battery, eco-friendly technology lift Panasonic
* Weak numbers stir doubts over Sony CEO Hirai's strategy
By Sophie Knight
TOKYO, Nov 1 Sony Corp CEO Kazuo
Hirai's determination to stick to the consumer electronics that
made the company's fame will be put to the test in the months
ahead as domestic rivals step up a shift to more profitable
On Thursday the home of gadgets from the Walkman music
player to the Cybershot camera warned it won't meet previous
full-year profit targets after sliding to a net loss of 19.3
billion yen ($197 million) for July to September. Its TV
operation relapsed into the red on weak sales.
Meanwhile Panasonic Corp raised its earnings
forecast on strong sales of products like batteries to industry
clients, and Sharp Corp bounced to its first quarterly
net profit in two years, helped by sales of solar panels.
The big three in Japan's electronics have been forced to
review their strategy choices after racking up combined
aggregate net losses of about $38 billion in the five years up
to March this year. While they struggled to rein in fixed costs
in Japanese manufacturing that eat away at revenue, nimbler
foreign companies like Apple Inc, Samsung Electronics
Co and Asian rivals grew richer and stronger.
Since Chief Executive Officer Kazuo Hirai took the helm last
year, Sony has promised a rebound in hardware with a
three-pronged strategy focused on mobile devices, imaging
technology and gaming. But the below-expectations performance in
the second quarter stirred doubts about how Sony can anchor a
turnaround by reviving fervour among consumers who now covet
goods like Apple's iPad and Samsung's Galaxy smartphone.
"I still cannot see any fundamental and believable strategy
for the rebirth of Sony's electronics business," said Makoto
Kikuchi, CEO of Myojo Asset Management based in Tokyo, speaking
after Sony announced its earnings.
"On the other hand Panasonic, which is shifting its business
away from consumer electronics, is reporting
better-than-expected results. The contrast is like night and
Just two of Sony's units, music and financial services,
boosted operating earnings compared with a year ago, while its
movie business also lost money. The Tokyo-based company has come
under pressure from major shareholder and hedge fund manager
Daniel Loeb to generate more value from its entertainment
division - pressure that could intensify after the weak
Officials representing Loeb weren't immediately available to
Sony shares sank 12 percent in Tokyo trading on Friday
morning, heading for their biggest one-day percentage drop since
Moody's ratings service on Friday said it was reviewing
Sony's credit rating and considering a downgrade from its lowest
investment grade rating to junk status.
In contrast, Osaka-based Panasonic raised its forecast for
operating profit in the year through March by 8 percent to 270
billion yen, more than had been expected, on strong sales of its
automotive systems and eco-friendly technology.
Panasonic shares rose as much as 5.9 percent, hitting a 2
At Sharp, a supplier of panels for the iPhone, a surprise
net profit of 13.6 billion yen in its fiscal second quarter was
helped by strong demand for solar cells and a weaker yen. While
it is still struggling to shore up its finances, recently
issuing $1.7 billion in new shares, it's a significant
turnaround from a 545 billion yen net loss a year earlier.
Sharp's shares rose 2.8 percent on Friday morning.
Panasonic's earnings statement came amid an appraisal of its
strategic choices. A day after saying it would ramp up supply of
lithium ion batteries to U.S. carmaker Tesla Motors Inc
to nearly 2 billion cells in the four years to 2017, Panasonic
formally confirmed it will exit plasma TV manufacturing.
Its TV and panel division lost 25.6 billion yen in the
second quarter, a wider loss than at Sony. Mopping up the red
ink comes at a cost, however: Panasonic raised its restructuring
budget for this year to 170 billion yen from a previous figure
of 120 billion yen.
At Sony, the commitment to build a healthy TV business lives
on. On Thursday, it said its TV operation flipped from a 5.2
billion yen operating profit in April-June - its first quarterly
profit in three years - to a 9.3 billion yen operating loss.
The smartphone business at Sony was one of few to show signs
of holding up in the latest quarter. Sony said it still expects
to sell 42 million smartphones this fiscal year, unchanged from
previous guidance, after selling 10 million in the three months
between July to September.
But with weak sales of video cameras and cameras, as well as
a slump in personal computers that has it racing to restructure
its Vaio division, the pillars of Hirai's future development
strategy look weak right now.
"We plan to revise our product, sales and manufacturing
strategy for our Vaio unit. We realise that we don't have much
time so we plan to implement our decisions in the next fiscal
year," Shiro Kambe, Sony's senior vice president, told
Sony is still aiming to get its electronics division in the
black this year, although Chief Financial Officer Masaru Kato
said it would likely miss a previous target of 100 billion yen
in operating profit.
One business for which Sony does retain high hopes is its
video games divisions.
There have been signs of a strong debut next month in the
U.S. and other key markets for Sony's new PlayStation 4 game
console, based on preorders. As with previous consoles,
development and rollout costs have been steep, although Sony has
pledged to turn a profit much faster than the four years it took
for the previous iteration of the console to make money.
"I think we're at a stage where they really should be
reconsidering their (three-pronged) strategy, but the company is
not going there yet," said Myojo Asset's Kikuchi.