May 26, 2011 / 6:20 AM / 9 years ago

Sony's profit forecast seen ambitious as quake, hacking weigh

TOKYO (Reuters) - Sony Corp’s forecast of its first annual net profit in four years was viewed as optimistic, as the consumer electronics giant struggles with the aftermath of the disastrous March earthquake and a series of network security breaches.

A Sony Walkman audio player is seen at the company's showroom in Tokyo May 4, 2011. REUTERS/Kim Kyung-Hoon

Havoc to supply chains and the physical damage caused by Japan’s earthquake and tsunami forced Sony earlier this week to take a charge on tax credits that resulted in a $3.2 billion net loss for the business year just ended, its biggest deficit since 1995 and the second worst on record.

The latest travails for the maker of PlayStation video games, Vaio computers and Bravia TVs come as it struggles to regain a market lead lost to Apple Inc in portable music and Samsung Electronics in flat-screen TVs.

Sony on Thursday predicted an 80 billion yen ($975 million) net profit for the year that started April 1, compared with analysts’ consensus of 105 billion yen, according to Thomson Reuters StarMine SmartEstimates, which places more weight on recent forecasts by top-rated analysts.

It expects to make an operating profit of 200 billion yen this business year, reiterating guidance given earlier in the week, which helped its shares rise.

But some think those forecasts might be too ambitious.

“Looking at their forecast, it appears Sony is expecting a recovery in the latter half of the year, which is a bullish forecast, but there’s a lot of uncertainty and there is a risk they come in below that expectation,” said Koji Takeuchi, senior economist at Mizuho Research Institute.

“It is still unclear what the financial burden of the security breach will be.”

The company said it would get production of Blu-ray discs and magnetic tape re-started at a tsunami-flooded plant over the next two months, but that the disaster would continue to affect almost all areas of the business, cutting operating profit by 150 billion yen over the year.

“Although most of the 150 billion yen effect will be in electronics, there will be an impact on almost all product categories,” chief financial officer Masaru Kato told reporters. “Those that are likely to be worst hit are televisions, digital cameras and devices,” he added.

HACKED

Sony said its liquid crystal display TV business was likely to stay in the red for an eighth straight year, because supply woes are expected to hamper production later in the year.

The electronics and entertainment conglomerate is also reeling from one of the biggest ever Internet security breaches, which forced it to close its PlayStation videogames network for nearly a month after data on tens of millions of user accounts was leaked.

On Tuesday Sony said additional websites in four countries had also been hacked. Among the break-ins, personal information for 8,500 people was leaked from its Greek Sony Music Entertainment website.

Sony said on Monday it expects the hacking to drag down operating profit by 14 billion yen in the current financial year, including costs for boosting security measures. It said it was sticking to a plan to restore its PlayStation Network in full by the end of May and that any delay would not be more than a few days.

Worries about the hacking have weighed on Sony shares, which have fallen by almost a quarter this year, three times the fall in the Nikkei average. The stock closed up 0.1 percent on Thursday ahead of the announcement, compared with a 1.5 percent gain in the benchmark.

For the year ending March 31, the company predicted that it will sell 15 million of its flagship PlayStation 3 game compared with 14.3 million in the year just ended. Sony reiterated its plan to release a next generation portable games device by the end of 2011.

It forecast liquid crystal TV sales of 27 million units compared with 22.4 million sets in the previous term.

Additional reporting by Takeshi Yoshiike and Tim Kelly; Editing by Chris Gallagher, Lincoln Feast and Muralikumar Anantharaman

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