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Sony warns of larger than expected loss as it exits PC business

Sony warns of larger-than-expected loss as it exits PC business

By Agence France-Presse | Updated: 1 May 2014 17:15 IST

Sony on Thursday warned it would report a bigger-than-expected annual loss, blaming costs tied to its exit from the personal computer business, as the once-mighty firm undergoes a painful restructuring.

The Japanese electronics giant said it would book a 130 billion yen net loss ($1.27 billion) in the latest fiscal year to March, while it slashed its operating earnings outlook.

The figure is worse than a 110 billion yen net loss forecast just three months ago, when Sony also announced it would cut 5,000 jobs in its struggling computer and television units.

The move came after Moody downgraded its credit rating on Sony to junk, saying the maker of Bravia televisions and PlayStation game consoles had more work to do in repairing its battered balance sheet.

On Thursday, Sony said it now expected to record 30 billion yen in additional expenses owing to its move out of personal computers, and 25 billion yen in impairment charges tied to its overseas production of Blu-ray discs, DVDs and CDs. Sony reports its financial results later this month.

(Also see: Sony considering spinning-off music and movie business)

"Primarily due to demand for physical media contracting faster than anticipated, mainly in the European region, the future profitability of the disc manufacturing business has been revised," it said.

Operating profit in the latest fiscal year would be down 89 percent from the previous year, although sales were expected to jump about 14 percent to 7.77 trillion yen, it said.

PC sales got worse after its February profit warning and "consequently, (the firm) expects to record write-downs for excess components in inventory and accrual of expenses to compensate suppliers for unused components ordered for Sony's spring PC lineup", the company said.

"In addition, certain restructuring charges are expected to be recorded ahead of schedule," it added.

Sony, which is a small player in the global personal computer market, is selling its Vaio-brand PC division to a Japanese investment fund as it looks to concentrate on its lineup of smartphones and tablets.

After suffering four years of losses, Sony crept back into the black in the previous fiscal year although that was mostly due to a weak yen and asset sales, including the firm's US headquarters in Manhattan.

(Also see: Sony to sell its Tokyo 'birthplace' in a desperate bid to raise cash)

Despite its high-profile struggles, Sony has seen buoyant sales of its Xperia smartphone offering and record demand for its new PlayStation 4 console. An entertainment arm, which includes a Hollywood studio, and little-known insurance business also make money.

But the firm's chief executive Kazuo Hirai, who has been leading a sweeping overhaul of Sony's business, has rejected calls to exit the money-losing television unit.

Japanese manufacturers have suffered badly in their TV divisions as razor-thin margins and fierce overseas competition weigh on results.

Sony's Tokyo-listed shares closed up 1.00 percent to 1,810 yen, with the loss announcement made after markets had closed.

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