Sony forecasts first annual net loss in 14 years

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(Agencies)
Updated: 2009-01-22 20:05

The efforts announced Thursday are expected to save Sony 250 billion yen for the fiscal year ending March 31, 2010, but the restructuring measures will cost 170 billion yen, according to Sony.

Women stand by Sony Building in Tokyo's Ginza shopping district Thursday, Jan. 22, 2009. Sony projected it would report its first annual net loss in 14 years Thursday. [Agencies]

Other measures include outsourcing software development in India, and signing deals for making cheaper products in emerging markets, it said.

Like other Japanese exporters, Sony is taking a beating from the global slump that crimped consumer spending during the critical year-end shopping season. The yen's appreciation and a plunge in gadget prices have also taken a toll.

Sony is particularly vulnerable to the strong yen since about 80 percent of its sales come from overseas. The dollar has dropped to below 90 yen recently from as high as 117 yen last year, eroding with it Sony's foreign income.

The last, and only, time Sony reported a loss, for the fiscal year ending March 1995, the red ink came from one-time losses in its movie division, marred by box office flops and lax cost controls.

Some of Japan Inc.'s biggest names are getting hammered by the global slowdown. Toyota Motor Corp., which last year dethroned General Motors Corp. as the world's largest automaker, is forecasting its first operating loss in 70 years, although it says it will eke out a small net profit.

Trouble has been brewing at Sony for some time. In October, it lowered its forecast to a 150 billion yen ($1.7 billion) profit, but it said conditions had worsened since then.

Sony said the slowing global economy and price declines were wiping out 250 billion yen in operating profit, while the yen's appreciation took out another 40 billion yen. Restructuring charges cost 30 billion yen. Declining equity value of its affiliates was an extra 20 billion yen loss, it said.

Profitability had worsened at its video game and movies units, as well as with its financial businesses in Japan, including an insurer and Internet bank, it said.

"We must move ahead with reforms, but my mission is to also nurture innovation," Chubachi said. "We will become a strong Sony."

The company's stock fell 51 yen, or 2.6 percent, to 1,938 yen. The earnings revision was announced after the market closed.

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