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Finance

Sony expects record $6.4 billion loss

Sony expects record $6.4 billion loss

Tue 10 Apr 2012 8:35pm GMT / 4:35pm EDT / 1:35pm PDT
BusinessFinance

As Sony's management shuffles, the company prepares for its biggest loss ever

Sony has warned investors that it expects the largest loss in the company's 65-year history for the fiscal year ended on March 31, 3012. The net loss is expected to total 520 billion yen ($6.4 billion), more than double the previously projected loss of 220 billion yen ($2.73 billion). According to Fox Business, the expanded loss is tied to deferred United States tax assets.

This follows Sony's announcement that it would be slashing its workforce by 6 percent (10,000 jobs). Sony CEO Kazuo Hirai is expected to reveal his turnaround plan for the company this Thursday.

"We consider the current situation to be very serious," said chief financial officer Masaru Kato in a press conference. "We will take resolute measures to transform our business without protecting any sacred cows."

Since becoming CEO, Hirai has already reshuffled Sony's corporate structure around with a new strategy dubbed "One Sony".

13 Comments

Wow. Things continue to get much, much worse for Sony :(

Just like I said with their last financial statement/release - people *should* be worried. The Sony that we know may be gone within a year or two.

Posted:2 years ago

#1

Preet D Bass
student

92 13 0.1
Good

Posted:2 years ago

#2

Jack Lee

60 6 0.1
Everyone seems to be assuming this is the death knell for the company, but really, it's the culmination of the bad business decisions over the last decade that have little to do with the Playstation business, much as we all like to think otherwise. It will be tough for Sony to weather this storm, but with Kaz taking over and making some hard, necessary decisions, Sony could bounce back in the future. I think investors will be mad at this forecast, but I also think they'll understand the fundamental change happening at Sony HQ and give them a year or two to get their sea legs. Sony as a company, particularly as the computer entertainment company that we are concerned with, isn't going anywhere soon. Their TV/LCD business, perhaps, but not Playstation.

Posted:2 years ago

#3

Steve Peterson
West Coast Editor

106 69 0.7
I think it's important to note that Hirai is also projecting a profit for the following year. He's trying to get all the bad news out now and put it behind them so they can move forward more effectively. Seems like a better strategy than dragging it out for years, if he can pull it off.

Posted:2 years ago

#4

Alfonso Sexto
Lead Tester

762 574 0.8
@Preetpal

Tell that to that 10.000 people.

Posted:2 years ago

#5

Bruce Everiss
Marketing Consultant

1,692 594 0.4
Apple could buy Sony out of their petty cash.

The killer has been the TV business which has just become a commodity with little product differentiation. Samsung etc have destroyed the Japanese giants in this market. And Sony have just stood there and taken the losses instead of adapting.

PS3 and Cell have been a total disaster. The conceit of Sony coming up with such grandiose idiocy. They lost sight of their customers. Microsoft used a KISS philosophy and now make over $100 on every 360 they ship. This is not rocket science and it was unbelievable to watch what Sony did.

Posted:2 years ago

#6
For once ;), I totally agree with Bruce. I can still remember the train wreck that was the PS3 dev/launch. "PS3 is twice as powerful as the 360", "BluRay will win us this generation", blah, blah, seeing Sony bloat the install base here in Australia by "giving PS3s away", etc. This has been coming a long time, and I can't see any turning point in the immediate future.

Posted:2 years ago

#7

Joshua Rose
Executive Producer / Lead Designer

191 80 0.4
I think their statement a couple months back was a bit of a mistake. I can't remember what the article was, but it was something along the lines of saying 'digital distribution is in it's infancy and we don't plan on getting involved in it until it's matured more'

BIG MISTAKE... all companies are moving towards digital distribution because it's cost effective... All Sony cares about is their console and selling discs. They're ignoring a growing game market, and in this industry, if you dont keep up with the standard, you lose...

Sony is a classic example of one of those companies that has too much invest into too many different markets. But even though they're all separate entities within the company, I still believe the playstation part of Sony gets it's way over everybody else: so they generally get the most funding I'd imagine. Which is why other parts of the company would be degrading at this point in time.

Look at the deal they made a while back with Steam for the PSN and Portal 2. Great idea, great concept, the first effective multiplatform capability in a modern game (please correct me if I'm wrong). But it's cross platform with PC as well, and what does sony thing? "yeah PC is okay but we're sticking with the playstation". They've had this amazing opportunity for multiple cross platform games, and they've hardly taken advantage of it.

IMO I think they've gotten to this point because of bad choice after bad choice, and now Godzilla is in a corner having to drop off some of his tail like any other lizard to escape from the danger.

Posted:2 years ago

#8

David Radd
Senior Editor

358 78 0.2
@Joshua I'm not quite sure where that quote is coming from, since SCE is already heavily invested in digital distribution with PSN. What is true is that they're trying to go the middle ground - retail is still important for their business and they can't cut that out entirely, but at the same time they can't ignore new market trends. That's also true for Microsoft and Nintendo - they're all retail dependent to some degree. Things like cross platform support and free-to-play is going to be slow coming, but they've made small steps in that direction.

Regardless, this isn't really about SCE, as a couple of others have pointed out. Saying Sony is a large corporation is like saying the Pacific is a large ocean - the company has been reacting rather than innovating in computer, TV and other fields and changing will involve losses and layoffs in the short term.

Posted:2 years ago

#9

Joshua Rose
Executive Producer / Lead Designer

191 80 0.4
@David: Makin me go look for stuff... grrr.

I actually couldn't find the article (buried under tons of other sony news etc). But the point I'm trying to make is they're putting all their eggs in one (playstation) basket.

The reacting instead of innovating is why this current console gen has been SO much longer than any other. Everybody is waiting for everybody else to throw down their hand and make a claim to the new gen console pot. reacting causes stagnation in innovation. Why is Samsung beating Sony on tv's? because Samsung is bringing out new innovations.

Like the last go around, when they invested so much money in the blu-ray stuff for the PS3, they lost tons of money due to the high throw-away-rate of the blu-ray technology of the time. Because of this they had to increase the sale price just to barely break even in the beginning. I fear they're going to do something similar with this go around, but who knows?

Posted:2 years ago

#10

Rolf Moren
Freelance Marketing Consultant

36 22 0.6
I'd like to point out that Sony is the company that has lost most customers to the Apple train. A buyer of Sony products has been one that really hasn't been that tech savvy but has looked more at design. Sony products has, just like the Apple products, always relied upon their brand being enough for them to get premium pricing for the same hardware as everyone else. Today that spot has been taken by Apple and the core Sony buyer has simply gone Apple-fanboys. Sony has also missed the train when it comes to the service-side of the business. Apple's real product is the online store and the hardware is selling because its the only way to connect to that store. The pure hardware difference between an Apple product and the competition is not big enough to explain the popularity gap. Services and not hardware is in the core of the hardware business today and that's why all the TV-makers are trying to put apps into TVs, which in itself is a misstake but too long to get into here.

Edited 1 times. Last edit by Rolf Moren on 12th April 2012 1:53pm

Posted:2 years ago

#11

David Radd
Senior Editor

358 78 0.2
@Joshua Sony has done alright by Blu-ray. Costs have come down and it's been a selling point for the PS3, but part of the problem is that the market is going away from physical sales like that and more towards digital. THe PS3 was classically over engineered when it came out and Ken Kutaragi tried pushing the system as something other than a game console - things like Cell just weren't necessary for what the system needs to do.

The big difference this generation was the head start Microsoft had and the significant price difference. Also, Xbox Live was a key selling point, and I feel like people are more likely to play network games if they know other people with that system; that's my theory as to why the Xbox 360 is selling better even now.

Posted:2 years ago

#12

Joshua Rose
Executive Producer / Lead Designer

191 80 0.4
Sony is doing alright by Blu-ray nowdays. But when it first came out, it had a higher manufacturing price, so the price was much higher to cover. They tried to push too much too soon at release, and it kind of bit them in the behind.

Microsoft did get a head start, yes. The 'significant price difference' at first, was due to the high cost of product associated with the Blu-Ray system. Back when blu-ray came out, was just around when the PS3 came out (iirc). When I got my first blu-ray player back then, it cost like 800 bucks, and that was for a Samsung.

If that's how much a player cost (just the player itself!) How much extra do you think the additional hardware found in the PS3 cost on top of production cost for the blu-ray player? I mean nowdays you can get a blu-ray player for like a hundred bucks, and it's a nice one, but at the beginning of the 'blu-ray era' the cost of production was the number one reason for high prices, because the throw-away-rate was too high due to inadequate and unperfected production methods. All of which have improved overtime, and thus you have decrease in production price, and overall unit cost.

Posted:2 years ago

#13

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