Sony clocks record $6.4-bn loss, twice its own forecast

Written by Bloomberg | Updated: Apr 11 2012, 07:07am hrs
Sony posted a record 520 billion-yen ($6.4 billion) loss after taking a charge to write down deferred tax assets as it loses ground to Apple and Samsung Electronics in music players and TVs.

The preliminary loss for the year ended March 31 is more than double the Tokyo-based companys forecast in February, it said in a statement on Tuesday. Shares traded in Germany fell 5% to 14.61 euros.

The loss underscores the challenge for President Kazuo Hirai, 51, in turning around the company that set the trend in electronics during the 1980s with products like the Walkman music player. Hirai, who succeeded Howard Stringer this month, has said he will close down less-competitive businesses and cut costs to revive Sony. The company predicted net income of 180 billion yen for the fiscal year that began this month, the first profit in five years.

Given the tax charges, Sonys revival and growth plans in the US dont seem to be working out, said Satoshi Yuzaki, a general manager at Takagi Securities in Tokyo. The market is very sceptical about the outlook for the company over the next three to five years.

The maker of Vaio computers and PlayStation game players fell 3.5% to 1,586 yen in Tokyo trading on Tuesday, before the announcement. Thats the lowest level for the stock since February 15, according to data compiled by Bloomberg. The shares have gained 15% this year after slumping 53% last year.

The cost of insuring Sonys debt against default rose 9 basis points to 199 basis points as of 5:16 pm in Tokyo, according to data provider CMA. Thats the highest level since March 23, CMA prices in Tokyo show.

Sony plans to take a charge of about 300 billion yen for writing down the value of deferred tax assets, predominantly in the US, according to the company statement.

The loss is the worst for Sony since it was founded in 1946 as Tokyo Telecommunications Engineering, according to Mami Imada, a spokeswoman. Including Tuesdays announcement of the 520 billion-yen loss, Sony lost a combined 919.32 billion yen in the past four years, according to data compiled by Bloomberg.

Its only been two months since Sony cut forecasts last time, said Nobuo Kurahashi, an analyst at Mizuho Financial Group in Tokyo. Given the general trend that orders and sales improved this past quarter, its unclear what could have changed so dramatically. Overall, the impression of todays announcement is very bad.

Hirai is scheduled to outline his turnaround plan on April 12. Sony, worth more than $125 billion in 2000, is now valued at $20 billion, compared with $591 billion for Cupertino, California-based Apple and $170 billion for Suwon, South Korea- based Samsung.

The new CEO, whos been credited with making the PlayStation game business profitable, is bringing in a new team and has put himself in charge of Sonys TV business, which is forecast to lose money for an eighth consecutive year.