Euro crisis adds to Sony woes
The debt crunch roiling Europe is adding to the obstacles Sony and its new boss Kazuo Hirai are trying to overcome in tackling the losses that have dogged Japan's iconic maker of consumer electronic gadgets.
Sony today reported a 77 per cent slide in first-quarter operating profit to 6.28 billion yen ($80.27 million) from a year earlier, much deeper than the 36 per cent slide analysts had expected.
The company in the year ended March 31st had posted an operating loss of 67 billion yen and a record net loss of 455 billion yen.
Citing exchange rate moves and a weak global economy, Sony cut its forecast for operating profit in the full year to 130 billion from a previous forecast of 180 billion yen.
The consensus forecast of 18 analysts surveyed by Thomson Reuters is for annual operating profit of 139 billion yen.
Taking the helm at Sony in April, Mr Hirai vowed to revive the fortunes of the maker of the Walkman music player and PlayStation gaming console after years of competition from foreign rivals overturned its dominance in consumer electronics.
Mr Hirai now faces the challenge of steering his limping corporation through a euro zone debt crisis that is denting global demand for consumer electronics and eroding the profitability of Sony products.
The evaporating value of the euro hurts all Japanese companies that sell their goods and services in Europe, but Sony is more sensitive to yen swings against the common currency than its local peers.
Sony's European sales account for a fifth of all revenue compared with a tenth at both Panasonic and Sharp.
A one-yen gain in the exchange rate against the euro cuts 6 billion yen off of Sony's operating profit. For Panasonic, a similar change would cut only 2.5 billion yen, and for Sharp, no more than 500 million yen.
The average against the dollar during the first quarter was 80.1 yen with the euro at 102.9 yen. The euro since has eroded in value to its lowest in more than a decade to around 95 yen.
Sony had planned for a euro/yen rate of 105 yen, but said today it would now adjust that to 100 yen. It kept its dollar/yen assumption at 80 yen.
In addition to currency risks, Sony is struggling to appeal to consumers in the face of competition from the likes of Apple, Samsung and Microsoft.
"Sales volume in the smartphone and game business seems to be making little progress toward guidance targets," Takashi Watanabe, an analyst at Goldman Sachs in Tokyo said in a report before the results.