Sony underwater in more ways than one with 27bn yen loss

The electronics manufacturer has been hit hard by Thai floods: it says it's now on course to make a £719m loss this year.

by Emma Haslett
Last Updated: 06 Nov 2012
It’s by no means been an easy year for Sony: first, it was hit by supply problems from the Japanese earthquake, then hackers caused its PlayStation Network all sorts of gyp – and now half of its Thai manufacturing facility is underwater. What next – a plague of frogs? And that’s not even mentioning the strength of the yen at the moment. So it’s no surprise, really, that the electronics manufacturer reported today that it’s on track to make a 90bn yen (£719m) loss this year – which contrasts pretty strongly with July’s prediction of a 60bn yen profit…

Today’s second-quarter figures show the extent of the damage to its finances. In the three months to September, it made a loss of 27bn yen, with an operating loss of 1.6bn yen – compared with a 68.7bn profit during the same period last year. On top of that, it said it expects the Thai floods to wreak havoc totalling 25bn yen – which includes not only the cost of restoring its water-logged factory to working order, but also finding new sources of parts for its TVs and PCs. Thus, it slashed its operating profit forecast by a singularly depressingly 90% - from 200bn in July to a mere 20bn yen. Ouch.

Looking at a break-down of its finances, though, suggests that it wasn’t just natural disasters and computer nerds with a chip on their shoulders that hit Sony where it hurt. Admittedly, much of the 12% year-on-year fall in revenues felt by its consumer products and services division (the division in charge of TVs, PlayStations, etc) was due to extenuating circumstances – but Sony admitted that it was also partly to do with increased competition in the sector.

Likewise, its music division, which reported a 9.1% drop in year-on-year revenues during the quarter, which it blamed on lower sales of albums outside the US. The only ray of sunshine, in fact, was Hollywood studio Sony Pictures, where revenues rose by 17% to 169m yen, while operating profits shot up to 20.6bn yen, from 4.8bn yen this time last year. Although the company added that much of that was to do with merchandising rights of Spiderman.

So while Sony has had its fair share of bad luck, the challenge now is for it to keep ahead of the competition. Perhaps its Spidey sense can help it with that…

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today