Blue screen of death for Sony's PC business

The Japanese electronics giant also slashed its full-year earnings forecast again and is cutting 5,000 jobs.

by Rachel Savage
Last Updated: 06 Feb 2014

Sony has finally given up the game with PCs and has decided to sell its VAIO brand, after failing to refresh its computer business. And to think, VAIOs were once desk candy second only to Apple Macs.
In a statement posted today, the Japanese company also announced it was axing 5,000 jobs, in an attempt to avoid drowning as it jumps from its sinking computing ship. Clearly Sony was still feeling more sumo than svelte, having already laid off 10,000 people since April 2012.
The former electronics behemoth slashed its full-year earnings forecast to a loss of 110bn yen (£670m), having chopped its profit estimate 40% to 30bn yen only three months ago.
Sony’s computer business has struggled as consumers switch to tablets and smartphones, which has pushed worldwide PC sales down for the last six quarters. However, smartphone sales will cheer the company up a bit - they pushed revenues in the company’s phones and computer division up 44.8% year-on-year to 461.5bn yen in the three months to January, helped along by the weakening Japanese currency.
Japanese Prime Minister Shinzo Abe’s reforms (known as Abenomics) have weakened the yen by 25% against the dollar since the end of 2012, and helped carmakers Toyota and Nissan post stellar results recently. Sony’s third quarter sales were up a whopping 24% to 2.4tn yen, but a less impressive 5% on a constant currency basis.

 Sony also announced that it is spinning out its loss-making TV business into a wholly-owned subsidiary, presumably so it can make a quick escape if sales continue to flounder. The company has been trying to squeeze profit out of its TVs since the end of 2011, when they made a loss of 147.5bn yen, and sheepishly admitted it expects a loss of 25bn yen for the 12 months to March this year.
‘There’s no prospect of its TV business being profitable,' said Myojo Asset Management’s chief exec Makoto Kikuchi emphatically. ‘Sony’s strengths are content such as games and movies. It cannot increase profit without moving its focus from TV production to content.’
Looks like he’s partly right - sales in Sony’s gaming unit rose 65% to 442bn yen, or 33% stripping out currency movements. However, the company put it down to all those geeks swarming to buy the new PlayStation geeks swarmed to buy the new PlayStation 4.
The box office wasn’t quite so booming, despite films such as American Hustle and Captain Philips raking in the awards. Sales in Sony’s picture unit were down 13% on a constant currency basis to 223.7bn yen, with Skyfall apparently a hard act to follow. That’s right – blame Bond. James Bond.

The big hurdle Sony has to cross is to figure out what it actually does: does it make mobiles? Games? Films? Shedding the PCs is just the beginning.

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