(Adds details on previous cuts, comments on CEO, comparisons
By Sophie Knight
TOKYO May 1 Sony Corp slashed its
earnings guidance for the third time in a year on Thursday to
barely 10 percent of its initial outlook as further losses from
its PC exit cast a pall over its struggling electronics
The steep cut marks the failure of chief executive Kazuo
Hirai to fulfil promises he made upon taking the helm of the
electronics giant two years ago to push electronics into the
black and casts further doubt over his financial management
after five cuts to earnings guidance during his term.
The repeated misses - the latest just two weeks before Sony
announces full-year results - are fuelling anger among investors
even as Hirai rebuffs billionaire hedge fund manager Daniel
Loeb's proposal to spin off Sony's profitable entertainment
"To be honest, I really wonder if he's got a grip on what's
going on with all his businesses," said Yasuo Sakuma, a
portfolio manager at Bayview Asset Management in Tokyo, who does
not own Sony shares. "Cutting forecasts at this time; are they
trying to hide something or have they lost it?"
Sony on Thursday cut its forecast for operating profit to 26
billion yen ($254.53 million) for the business year ended in
March from a previous estimate of 80 billion yen and down from
an initial forecast of 230 billion set last May.
It said it would have to write down a further 30 billion yen
on its Vaio PC unit, reflecting a sharp drop in sales as
consumers shunned the brand following Sony's decision in
February to get out of the business.
That would also swell Sony's restructuring costs this year,
which it said in February would reach 70 billion yen.
Sony widened its annual net loss estimate to 130 billion yen
from the 110 billion it forecast in February, when it reversed a
previous profit outlook.
The company will also book 25 billion yen in impairment
losses from its disc production unit due to weak demand in
Europe, as online streaming services like Netflix erode the DVD
Sony is struggling to recover after being undercut by
nimbler Asian rivals in its key markets, in contrast to Japanese
peer Panasonic Corp, which has staged a revival from
deep losses by embracing industrial products and selling to
businesses rather than consumers.
While Panasonic tends to beat its conservative forecasts -
last week its full-year operating profit came in 13 percent
above its forecast - Sony has become known for missing overly
Before Thursday's cut, Sony had missed its forecasts in 10
of the prior 12 years, excluding gains from asset sales, the
worst among 30 Japanese consumer electronics makers, analysts at
brokerage firm Jefferies calculated in March.
By comparison, Panasonic, with the best record, exceeded its
guidance nine times over the same period.
Since Hirai was named chief executive in February 2012,
Sony's stock has risen 30 percent, far less than the wider
Japanese market's 65 percent climb for the period.
He has started selling key assets in a bid to restore
profitability at the company's struggling electronics division,
where 10 years of losses on TVs have totalled $7.8 billion.
The selloffs included the sale of its U.S. headquarters
building in New York for $1.1 billion, which it used to boost
its operating profit for 2012/13 to 230 billion yen. This year,
it sold two major buildings in Tokyo for $1.2 billion.
Sony now makes most of its operating profit from
its financial and insurance arm.
But the focus is still on profitability within electronics,
on which Hirai has pegged Sony's rebirth using a three-prong
strategy around mobile, imaging and gaming.
Strong sales of the Playstation 4 console offer one bright
spot, but development costs mean it could take at least another
year to turn a profit.
Sony's entertainment business, another reliable contributor
of profit, came under pressure last year from Loeb's proposal
for a spinoff to create more value for shareholders.
Loeb's fund, Third Point, had no immediate comment on
Thursday's earnings revision.
Sony shares ended 1 percent higher on Thursday before the
announcement. The stock is down 1 percent so far this year after
surging 90 percent in 2013. That compares with a 11 percent
decline for the benchmark Nikkei since the beginning of
($1 = 102.15 Japanese yen)
(Reporting by Sophie Knight; Editing by Dominic Lau, William
Mallard and Matt Driskill)