TOKYO Sony Corp slashed its operating profit estimate by nearly 70 percent for the financial year ended March 31, saying it expects its exit from PCs to add nearly $300 million in extra costs as it struggles to stem losses on electronics.
The Japanese consumer electronics giant on Thursday cut its operating profit forecast to 26 billion yen ($254.53 million) from a previous estimate of 80 billion yen, adding that it would book 25 billion yen in impairment losses from its DVD and CD-ROM production unit for fiscal 2013 due to weak demand in Europe.
The company also widened its net loss estimate to 130 billion yen, wider than the 110 billion it forecast in February, when it reversed a previous profit outlook.
Sony's chief executive, Kazuo Hirai, has spent the last two years selling off key assets in a bid to restore profitability at the firm's struggling electronics division, where TVs have lost $7.8 billion over 10 consecutive years.
The selloffs included the sale of its U.S. headquarters building in New York for $1.1 billion as well as two major buildings in Tokyo for $1.2 billion.
But the focus is still on profitability within electronics, on which Hirai has pegged Sony's rebirth using a three-prong strategy around mobile, imaging and gaming.
Sony said it would spin-off its TV division into a separate business and sell its Vaio PC business when it announced its third-quarter earnings in early February. A further write-down of the PC division would add another 30 billion yen ($294 million) in costs for 2013-14, Sony announced on Thursday.
The revisions represent a deep cut to Sony's initial operating profit forecast of 230 billion yen first made last May and then cut in October. Last summer, the firm came under pressure from activist investor and hedge fund manager Daniel Loeb to spin off its entertainment business to create more value for shareholders.
Sony shares ended 1 percent higher on Thursday before the announcement. The stock is down 1 percent so far this year after surging 90 percent in 2013. That compares with a 11 percent decline for the benchmark Nikkei since the beginning of 2014.
($1 = 102.15 Japanese yen)
(Reporting by Sophie Knight; Editing by Dominic Lau)
Trending On Reuters
With the crucial GDP data scheduled to be announced along with key corporate results, volatility is expected to prevail in the upcoming week. Disappointment on these fronts may push the Nifty down to the 7,200-7,500 range. Once we witness stability and consolidation, investors should increase their exposure, says Ambareesh Baliga. Full article