Japanese entertainment and electronics giant Sony Corp. is expected to post another quarterly loss when it reports results Wednesday as a strong yen and its struggling TV business drag on its bottom line.
WHAT'S EXPECTED: It's been a tough year for Japanese exporters such as Sony, and the latest quarter is likely to reflect ongoing currency-related woes. The yen has hit multiple record highs against the dollar, which has faltered along with the U.S. economy. Every time the yen climbs, the value of Sony's overseas earnings shrinks when converted back to yen. Sony makes about 70 percent of its sales outside Japan.
Its TV business is still in the red amid falling prices and intense competition. Its games division also likely incurred a loss, reflecting a price cut announced in August for the PlayStation 3 console and costs related to the upcoming launch of its PlayStation Vita handheld device. It could also book lingering costs from its global security breach earlier this year.
BY THE NUMBERS: For the fiscal year ending March 2012, Sony forecasts sales to stay flat at 7.2 trillion yen ($94.7 billion). It expects to rebound into the black with a net profit of 60 billion yen ($789 million), compared with a 259.6 billion yen loss last year. It assumes foreign exchange rates of about 80 yen to the dollar and 115 yen per euro.
STOCK PERFORMANCE: The issue has plunged about 43 percent this year, considerably worse than a 13 percent retreat by the benchmark Nikkei 225 stock average.
ANALYST TAKE: Kota Ezawa, an analyst at Citigroup Global Markets Japan, has a "buy" rating on Sony stock but expresses concerns about the pace of reforms this year.
"Sony urgently needs additional restructuring, particularly in the TV business, but over the last three months there has been almost no new information about its plans," he said in an Oct. 20 report. "We estimate restructuring costs of 55 billion yen ($725.8 million), but also see potential for costs to rise to as much as several hundred billion yen."
He also predicts tough times for Sony's camera business, which faces declining demand and losses from the recent flooding in Thailand. Sony makes the majority of its SLR and mirrorless lens cameras, as well as high-end compact digital still cameras, in the heavily flooded Ayutthaya province, Ezawa said.
WHAT'S AHEAD: Sony's next major launch is the Vita, which will go on sale in Japan on Dec. 17 and two months later in North America and Europe. It features a touch-interface and motion-sensitive handheld that Sony hopes will be a strong successor to the PlayStation Portable.
The Wi-Fi only model will cost $249.99 in the U.S. and euros 249.99 in Europe. The Wi-Fi and 3G-enabled Vita will retail for $299.99 and euros 299.99.
Analysts will also be watching to see what Sony does with mobile phone maker Sony Ericsson under full ownership. LM Ericsson and Sony announced Thursday that they would part ways in the joint venture, with the Swedish company selling its 50 percent stake to its Japanese partner.
The transaction gives Sony an opportunity to integrate smartphones with consumer electronics devices, such as tablets, televisions and personal computers, the companies said. Sony CEO Sir Howard Stringer called the deal "the last piece of the puzzle" for Sony's portfolio of entertainment products, including movies, television and music.
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