Commentary

Sony Cites Bad Reception In Mobile For Projected $2.1 Billion Loss

Primarily blaming the “competitive environment” in the mobile phone business, Sony this morning said it may lose upwards of $2 billion this year — five times more than it anticipated just a couple of months ago. It also will pay no dividend for the first time since the company went public in 1958.

“Citing intense competition, especially from Chinese rivals, Sony … anticipates a net loss of 230 billion yen ($2.15 billion) for the fiscal year that ends March 31, 2015. Its previous forecast was for a 50 billion yen ($466 million) net loss,” reports the AP’s Elaine Kurtenbach.  

“The Chinese smartphone manufacturers have made great strides and are expanding outside their own market, and this has caused a shift in the pricing,” said Kazuo Hirai, who became Sony president and CEO in April 2012. “Meanwhile, Apple and other manufacturers are launching strong, innovative products. The changes are very rapid and dramatic.”

In its revised consolidated forecast, Sony stated in a release that it “will record an impairment charge of approximately 180 billion yen [$1.68 billion], the entire amount of goodwill in the [mobile communications] segment, in the second quarter of the current fiscal year.”  

“This seems to be the end game for Sony as a major player in consumer electronics; it’s a bit of a bellwether moment,” Pelham Smithers, managing director of Pelham Smithers Associates, tells the New York Times’ Paul Mozur.

“Smithers said he believed devaluation of the mobile communications unit could lead to a spinoff of the company’s mobile phone division in what would be the final step of the company separating itself from its struggling major consumer electronics divisions,” Mozur reports.

Meanwhile, it’s slashing operating expenses.

“The company plans to cut staff in its mobile communications business by about 15%, or roughly 1,000 people, Hirai said,” according to the AP report. 

The “grim forecast came just as there had been some signs Sony’s restructuring measures might be starting to bear fruit. Over the past year, the company has spun off its television unit into a subsidiary and sold its PC business,” write the Financial Times’ Kana Inagaki and Patrick McGee. “In July, it surprised the market by returning to profit for the second quarter, buoyed by its strong PlayStation game business.”

Hirai was “expected to launch new measures including streamlining of product line-up and a change in geographical focus at a news conference later on Wednesday,” Inagaki and McGee also report. 

“The company recently unveiled a new range of smartwatches and launched a smartphone that will allow gamers to integrate the device with its PS4 PlayStation console,” the BBC reports, while pointing out that the  company “has undertaken a major restructuring to try and stem the losses.” 

Hirai “sold off parts of the business deemed not central to the company's operations, including its personal computer business,” the BBC continues. It also sold its U.S. headquarters on New York’s Madison Ave. for $1.1 billion last year, as well as its “Sony City Osaki” base of operations in Tokyo for $1.2 billion. 

Speaking after the Japanese market closed today, Hirai said that  “for more than 50 years we always paid a dividend. The entire management takes this very seriously.”

Meanwhile, in honor of the Blu-Ray release of the 30th anniversary edition of Sony Pictures’ blockbuster “Ghostbusters,” Krispy Kreme is selling two kinds of marshmallow-filled doughnuts from Sept. 29 through Oct. 31, reportsVariety’s Kevin Noonan.

“We are truly excited to collaborate with Sony Pictures in celebration of the 30th anniversary of the iconic ‘Ghostbusters’ brand,” said Dwayne Chambers, Krispy Kreme’s chief marketing and innovations officer. “And we are delighted to bring our fans two delicious, limited-edition treats that are as unique, creative and joyful as this beloved film franchise.”

As for Sony Pictures, there have been “a series of changes to the studio's executive ranks as it has tried to trim costs over the last year,” the Los Angeles Times’ Ryan Faughnder wrote earlier this month while reporting on the appointment of Josh Greenstein as president of worldwide marketing and distribution for Sony Pictures Entertainment. Greenstein is taking over responsibilities handled for 22 years by vice chairman Jeff Blake, who stepped down in July.

As for the consumer electronics end of Sony’s business, the big question seems to be, “Who Ya Gonna Call?

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