Sony turnaround falters

The Japanese electronics maker booked a large loss in its first quarter and lowered expectations for the year

Sony's big recovery has already faltered.

Less than three months after announcing its largest annual loss ever but promising a quick turnaround, the company on Thursday booked a ¥24.6 billion ($US310 million) quarterly loss and slashed its yearly profit forecast by a third.

Sony's loss during its April-June quarter was 60 percent worse than last year, when it was struggling with the aftereffects of a devastating earthquake and tsunami that struck in March. The company said it booked a large loss in its mobile phone division, due in part to the struggles of the former Sony Ericsson mobile joint venture, which it made into a subsidiary in February.

The company's game division also fell to a loss during the period, as sales of its older PlayStation Portable and PlayStation dropped. Sales of the newer PlayStation Vita increased, but newer game consoles are often sold at a loss or near break-even levels, compared to robust margins on more mature hardware. Its movie business also sank into the red during the quarter.

Sony also cut its annual profit target to ¥20 billion yen from the ¥30 billion yen it forecast in May, saying it now expects sales to be 8 percent lower than it perviously thought. The decreasing expectations evoke memories of last year, when Sony originally said it would make a healthy profit, then slashed its target every three months as it was beset by falling sales amid natural disasters and a hacking scandal, eventually booking the biggest loss since it was founded in 1946.

The latest April-to-June stretch was Sony's first under new CEO Kazuo Hirai, who previously ran its consumer electronics and PlayStation gaming operations. Hirai has sworn to turn Sony around by refocusing on the sleek gadgets that made it famous. The company once served as the role model for the rivals it is now chasing - recent court documents submitted in a U.S. patent lawsuit between Apple and Samsung show that part of the design process for the iPhone involved creating "Sony-like" mockups to work from.

Hirai has also said the company will focus on strengths such as its image sensor technology and build out its online service platforms, while shedding other businesses. Sony has made several announcements in line with the rebuilding plan in recent months, including a US$1 billion investment in its production lines for image chips over the next several years, the sale of its chemical operations, and a plan to cut around 10,000 jobs, or 6 percent of its total workforce.

The company has also moved to capitalize on its strong brands, include introducing a new "PlayStation Certified" program approves devices made by other manufacturers to run official PlayStation games, a rare move for the owner of a game console. Taiwan's HTC will be the first to make devices under the program.

Like many Japanese companies, Sony's financial year runs from April to March each year.

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Jay Alabaster

IDG News Service
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