Sony vows deeper restructuring, warns of another loss this year
TOKYO (Reuters) - Sony Corp (6758.T) said it would step up a broad restructuring this year to tackle bloated costs and exit some unprofitable businesses, hoping to put behind it years of persistent losses.
The Japanese consumer electronics giant, which warned on Wednesday of a second consecutive net loss for this financial year, is struggling to recover after being undercut by nimbler Asian rivals in its key markets. Domestic peer Panasonic Corp (6752.T), by contrast, has turned around its business by embracing industrial products and pursuing more corporate clients rather than consumers.
Sony said it would spend 135 billion yen ($1.32 billion) on restructuring in the year to March 31, adding to the 177.4 billion yen it spent in the previous year, as it sells off its loss-making Vaio PC and disc storage businesses. It forecast those costs will push it into a 50 billion yen net loss for the 2014/15 financial year, its sixth loss in seven years. Combined, these losses amount to nearly 1 trillion yen.
"We'll make this a year of biting the bullet on restructuring," Chief Financial Officer Kenichiro Yoshida told an earnings briefing. "I'd like to finish restructuring this year."
The sluggish pace of Sony's turnaround had called into question Chief Executive Kazuo Hirai's leadership after he failed to achieve his goal of restoring the flagship electronics division into the black. Sony had also cut its earnings guidance three times for the financial year that ended on March 31.
Analysts said the management now finally appeared committed to pushing ahead with changes, but doubts remained about the company's ability to recover its earnings momentum.
"The markets are taking a positive view of its restructuring but the question is when its earnings will start recovering after that," said Rakuten Securities senior market analyst Masayuki Doshida.
"The markets may think all the bad news has come out now, so I expect Sony shares to rebound after an initial fall."
CFO Yoshida was brought back to Sony late last year from So-net, a domestic Internet services subsidiary that had achieved healthy profit margins under his leadership.
He became chief strategy officer in December and chief financial officer in April, replacing executives appointed by Hirai's predecessor, Howard Stringer.
Once again, Yoshida forecast Sony's electronics division would return to profit this year, which would be its first profit in four years. The key division, projected to earn a 125 billion yen operating profit this year, was freed of the loss-making TV business which will be spun off into an independent unit this year.
Yoshida said he would aim to reduce volatility in the electronics business by promoting smartphone contracts with corporate clients, for example.
Over the past 18 months, Sony's shares have lagged rival Panasonic, which reported a profit last financial year after posting $15 billion in combined losses in the two years to March 2013 during a sweeping restructuring.
Since its latest profit warning at the start of May, Sony's shares have been largely flat, in line with the Tokyo benchmark Nikkei average and outperforming Panasonic's 4 percent drop.
Sony said operating profit in the 2014/15 financial year to March 31 was expected to rise more than five times compared to the year-ago level to 140 billion yen, falling short of the 227 billion yen average of 20 analysts' estimates from Thomson Reuters StarMine.
Sony reported a 128.4 billion yen net loss for the 2013/14 financial year that ended March 31, in line with its own forecast of a 130 billion net loss.
($1 = 102.2250 Japanese Yen)
(Additional reporting by Hideyuki Sano and Takashi Umekawa; Editing by Edmund Klamann and Miral Fahmy)
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