Sony's 4th-Qtr Loss Smaller Than Expected on PlayStation Sales
April 27 (Bloomberg) -- Sony Corp., the world's second- biggest consumer electronics maker, had a smaller-than-expected loss in the fourth quarter on sales of its PlayStation Portable handheld gaming console and lower costs for cutting jobs.
The net loss in the quarter ended March 31 widened to 56.5 billion yen ($532 million), or 59.40 yen a share, from 38.2 billion yen, or 41.23 yen, a year earlier, the Tokyo-based company said in a statement. The median estimate in a survey of eight analysts by Bloomberg was for a 70.3 billion yen loss. Profit will drop 51 percent this fiscal year on falling prices of televisions and DVD recorders, the company said.
Sony today forecast shipments this fiscal year of 12 million PSPs after the consoles sold out on the first day of sale in Japan in December. Chief Executive Howard Stringer, appointed in March, is relying on new products to revive earnings as competitors such as Samsung Electronics Co. and Apple Computer Inc. cut prices to grab market share.
``The PSP is an interesting product,'' said Pascal Masse, who helps manage $12 billion of Asian equities at Aberdeen Management Asia Ltd. in Singapore. ``Would that help Sony's earnings? It could. But would it save Sony? I think it's an exaggeration.''
Sales were at 1.7 trillion yen from 1.77 trillion yen a year earlier, the company said. Operating loss, or sales minus the cost of goods sold and administrative expenses, shrank to 77.4 billion yen from 109.8 billion yen. Analysts expected sales of 1.67 trillion yen and an 81.3 billion yen operating loss.
For the year started April 1, Sony forecasts net income of 80 billion yen.
The company's German-traded shares rose 2.8 percent to 29.14 euro at 6 p.m. Tokyo time, after a 2.3 percent gain on the Tokyo Stock Exchange. The results came after the Japan market closed.
`iPod Killer'
The PlayStation Portable, Sony's first foray into the handheld video game industry dominated by Nintendo Co., has been dubbed a possible ``iPod killer'' by analysts such as Koya Tabata at Credit Suisse First Boston in Tokyo. The device can play music and movie files and future versions will allow users to surf select Web sites to download music and other content, Sony said.
In the first week of U.S. sales in March, the company sold more than 500,000 units of the handheld gadget, which came with a copy of Sony Picture Entertainment's ``Spider-Man 2'' movie, at $250 each. The company has shipped 2.97 million PSP units at the end of quarter, today's report showed, compared with 1.18 million units at the end of February.
The video games business had a 1.49 billion yen operating profit in the fiscal fourth quarter from a loss of 6.89 billion yen, the company said.
Lower Charges
Stringer, 63, has said he will follow through with a three- year, 330 billion yen cost-cutting plan introduced in October 2003 by his predecessor Nobuyuki Idei and former President Kunitake Ando.
The company took a 90 billion yen charge on restructuring costs in the year ended March 31, less than the 100 billion yen it had forecast earlier in the year, because it overestimated how much it would have to pay people seeking early retirement. Sony expects to take a 72 billion yen charge for restructuring this fiscal year, the company said.
In the division, ``sales are expected to grow thanks to sales of the PSP and software,'' said Katsumi Ihara, Sony's chief financial officer, at a media conference in Tokyo today. ``There will be higher research and development costs for the next generation game console, which will leave operating income little changed this fiscal year.''
Margins Squeezed
Sony has outperformed Japan's stock indexes since March 7, when the company named Stringer the company's first non-Japanese chief executive, and Ryoji Chubachi, 57, as president. Sony's 3.2 percent decline compares with a 7.7 percent drop on the Nikkei 225 Stock Average and 6.1 percent fall in the Topix Index.
Shares of Sony, which invented the Walkman in 1979, have dropped 76 percent from a record high on March 1, 2000. Samsung earned 17 times more than Sony per employee during the 2003 business year, according to Bloomberg data. Apple earned about 4.5 times more than Sony.
``Across Asia, consumer electronics makers are increasingly facing a margin compression because of rising competition and price-cuts to lure more customers,'' said Praveen Choudhary, a technology analyst at Morgan Stanley in Singapore. ``Whether the companies can overcome this general trend depends on whether they can increase volume and introduce new products.''
Sony's electronics business, which makes Wega televisions and Vaio computers, had a 99.4 billion yen loss from a 129.3 billion yen loss a year ago.
The electronics unit may make a loss for a third year, said Ihara. Prices of liquid-crystal displays TVs fell 20 percent to 30 percent last fiscal year, while prices of DVD recorders slid 40 percent, he said. Prices for digital cameras dropped about 10 percent.
`Wow'
For the full year, net income rose 85 percent to 163.8 billion yen profit. Sales dropped 4.5 percent to 7.16 trillion yen. Sony plans to raise capital investments this fiscal year by 15 percent to 410 billion yen, which includes 160 billion yen on semiconductors, today's report showed.
Operating profit at the movie unit fell 63 percent to 13.7 billion yen, and the music business reported an operating loss of 2.63 billion yen, narrowing from 9.13 billion yen a year ago.
``Sony's problem is the lack of innovation and lack of change,'' said Chip Zhu, who manages a $58 million technology fund at Gartmore Global Investments in West Conshohocken, Pennsylvania. ``In the last few years, I have not seen a product that has jumped out and said `Wow.'''
