JAPAN/FILE: Sony Corporation names a new chief executive as the company warns it is heading for a bigger-than-expected 2.9 billion US dollars annual loss

Record ID: 451682

  • Title: JAPAN/FILE: Sony Corporation names a new chief executive as the company warns it is heading for a bigger-than-expected 2.9 billion US dollars annual loss
  • Date: 3rd February 2012
  • Summary: TOKYO, JAPAN (FILE) (REUTERS) MEDIA FILMING PLAYSTATION VITA VARIOUS OF PLAYSTATION VITA VARIOUS OF SONY 3D TVS ON DISPLAY
  • Embargoed: 18th February 2012 12:00
  • Keywords:
  • Location: Japan
  • Country: Japan
  • Topics: Business,Industry,Science / Technology
  • Reuters ID: LVAEW0B36CSYOCBL36TFCB06MYMP
  • Story Text: Ailing Japanese electronics giant Sony Corp warned it was heading for a bigger-than-expected 2.9 billion US dollars annual loss, presenting a daunting task for incoming CEO Kazuo Hirai, who vowed to move quickly to turn things around.
    Hirai, a 28-year company veteran known for overseeing the phenomenal rise of the PlayStation gaming system in the United States, will take over as CEO and president from April 1.
    His appointment is part of a plan that hinges on turning around the company that has come under fire for losing the innovative edge behind products like the Walkman and PlayStation, and ceding ground to rivals such as Apple Inc and Samsung Electronics as consumers snapped up iPhones, iPods and Galaxy gadgets.
    "As I have decided to take the post of CEO, in addition to realising responsibility of taking this post, I also plan to use all of Sony's resources in order to face the difficult situation that we are in and look towards increasing growth in the future," the executive deputy president of Sony Corp, Hirai said about his new appointment.
    Sony's forecast for a 220 billion yen (2.9 billion US dollars) loss for the year to March, its fourth straight year of red ink, was close to double what the market had expected.
    There is unlikely to be a honeymoon period for Hirai, who is under immediate pressure to sort out the ailing TV business after it fell behind South Korean rivals such as Samsung in a market where prices are tumbling.
    Hirai sketched out his priorities in a statement late on Wednesday.
    "There will be situations in which we will be required to choose, make a decision, or implement very painful issues that cannot be avoided for the future of Sony. But we can't take a step forward if we are afraid of this," Hirai said of his task ahead.
    Sony Corp fell into a 91.7 billion yen (1.2 billion US dollars) operating loss in October-December, a disappointing result for the usually lucrative with the Christmas and year-end sales, as it battled a strong yen and flooding in Thailand that ruptured supplies and a weak economy.
    Hirai takes over from Welsh-born Howard Stringer, a former journalist who ran U.S. broadcaster CBS, was brought in as a rare foreign CEO in Japan to shake things up, but many analysts see his major achievement as cost-cutting.
    "Sony, like much of Japan, is in real difficulty. We've bounced back twice, and don't bet against us bouncing back again. It would be very nice if there were no earthquakes, no floods, no hackers, no anything. But on our own skills we can get the company back to the targets that we've already issued," Stringer said.
    Stringer sold off TV factories in Spain, Slovakia and Mexico and outsourced more than half of its production to other companies, including Hon Hai Precision Industry, the contract electronics maker whose key customer is Apple.
    For the next financial year, starting in April, Chief Financial Officer Masaru Kato said Sony aims to make an operating profit of about 200 billion yen, halving its TV losses and operating at a 5 percent margin. The TV business was forecast to lose 220-230 billion yen this year.
    "Sony's results were terrible. We're basically looking at a 3 billion U.S. dollar loss for the year, which by any standard is bad. It's far below what consensus was looking for. I would expect however that although the number the company is saying is conservative, I would not be surprised to see further downside on a yearly number," Partner and Head of Sales for JI Asia Glen S. Wood said.
    Recently, Sony exited an LCD panel joint venture with Samsung - writing off 63.4 billion yen in the third quarter - enabling it to obtain screens for its TVs more cheaply.
    "One of the problems I think Stringer had was in terms of pricing and strategy in the TV business and the hardware side of the PlayStation, as well as the software for integrating the many products that Sony makes. He didn't have that expertise, he came from entertainment side of the business, so I think that part of the business was quite a challenge for him. Whereas Hirai should be much closer coming from the game side of the business, being able to manage that," Wood said.
    The last year has been brutal for many Japanese companies, hit by a strong yen that hurt exports, and two natural disasters - the March earthquake in Japan and record floods in Thailand.
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