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Headline, Industry News
Sony slashes profit forecast 38%
Thursday October 19th 2006TOKYO (AP) _ Sony (NYSE:SNE) slashed its profit forecasts Thursday because of costs from a massive global recall of laptop batteries and price cuts in Japan for the next-generation PlayStation 3 video game console. Sony Corp. now expects group net profit of 80 billion yen or US$673 million for the fiscal year through March 2007, down 38 per cent from the 130 billion yen or US$1.1 billion it had projected in July.
The revision reveals the deep troubles at the Japanese manufacturer as it tackles a turnaround under its first foreign chief executive, Welsh-born American Howard Stringer. Sony may need to further lower its projections as losses related to the battery recall may grow, said Tatsuya Mizuno, analyst a Fitch Ratings in Tokyo. Toshiba Corp. has said it may demand damage compensation from Sony, and others may follow suit.
"The battery problem is not a simple, one-time problem for Sony because it hurts the company’s reliability as a supplier in its core electronics sector," Mizuno said.
The problem stems from lithium-ion batteries that can short circuit, causing some computers to overheat or even burst into flames. Sony-made batteries have been recalled in recent weeks by U.S. makers Dell Inc. (NASDAQ:DELL) and Apple Computer Inc. (NASDAQ:AAPL), as well as Japanese makers Toshiba Corp., Hitachi Ltd., Fujitsu and Sharp Corp. Sony is recalling its own Vaio laptops, further trimming earnings.
Sony said the recall affects 9.6 million batteries worldwide, including 90,000 in Vaio, forcing the company to book costs of 51 billion yen (US$429 million) for the quarter. The Japanese electronics company had initially said the battery recalls will cost the company between 20 billion yen (US$168 million) and 30 billion yen (US$252 million). Sony spokesman Takashi Uehara said that figure does not include "provisions for possible lawsuits," indicating costs may continue to grow. The woes are the latest troubles battering Sony as it tries to turn around its business after getting beaten by rivals on key consumer electronics products such as digital music players and flat-panel TVs.
Sony left unchanged its fiscal year sales outlook at 8.23 trillion yen (US$69 billion) but lowered its operating profit 62 per cent to 50 billion yen (US$420 million) from the earlier forecast for 130 billion yen (US$1.1 billion). Meanwhile, a 20 per cent price cut in Japan for the basic PlayStation 3 console will decrease earnings for the video game sector, the company said. Last month, Sony announced prices would fall to about US$400, putting the console in the same range as Microsoft Corp.’s (NASDAQ:MFST) basic Xbox 360 with HD DVD player.
There were no plans to lower prices in the United States or other markets. The U.S. price for the basic version is $499; a version with three times the storage capacity goes for $599. The machines are set to go on sale in Japan and in the United States in November, but production delays forced Sony to delay sales in Europe until March. Sony said Thursday those delays will also be costly.
Sony, which is planning to ship six million PlayStation 3 machines by March, has said it will only have 400,000 machines in the United States and 100,000 in Japan for their launches. Retailer GameStop Corp. filled its pre-order slots quickly, in some cases within minutes after they were opened earlier in the month. Meanwhile, Sony said sales and profits for the handheld PlayStation Portable have also been lagging and will push down results.
But Sony said despite such setbacks, it is on its way to a turnaround in its core electronics business because of hit products such as the Bravia liquid-crystal display TVs and digital cameras. Sony has regained some market share in flat TVs with products using displays produced in a joint venture with Samsung Electronics Co. of South Korea. It is still struggling in portable music players, where the IPod from Apple Computer Inc. commands top market share not only overseas but in Japan. Sony shares, which have fallen back after gaining 50 per cent earlier this year, slipped 0.4 per cent in Tokyo to close at 4,790 yen. The forecast revision was announced just after the market closed.
Headline, Industry News
Sony slashes profit forecast 38%
Thursday October 19th 2006TOKYO (AP) _ Sony (NYSE:SNE) slashed its profit forecasts Thursday because of costs from a massive global recall of laptop batteries and price cuts in Japan for the next-generation PlayStation 3 video game console. Sony Corp. now expects group net profit of 80 billion yen or US$673 million for the fiscal year through March 2007, down 38 per cent from the 130 billion yen or US$1.1 billion it had projected in July.
The revision reveals the deep troubles at the Japanese manufacturer as it tackles a turnaround under its first foreign chief executive, Welsh-born American Howard Stringer. Sony may need to further lower its projections as losses related to the battery recall may grow, said Tatsuya Mizuno, analyst a Fitch Ratings in Tokyo. Toshiba Corp. has said it may demand damage compensation from Sony, and others may follow suit.
"The battery problem is not a simple, one-time problem for Sony because it hurts the company’s reliability as a supplier in its core electronics sector," Mizuno said.
The problem stems from lithium-ion batteries that can short circuit, causing some computers to overheat or even burst into flames. Sony-made batteries have been recalled in recent weeks by U.S. makers Dell Inc. (NASDAQ:DELL) and Apple Computer Inc. (NASDAQ:AAPL), as well as Japanese makers Toshiba Corp., Hitachi Ltd., Fujitsu and Sharp Corp. Sony is recalling its own Vaio laptops, further trimming earnings.
Sony said the recall affects 9.6 million batteries worldwide, including 90,000 in Vaio, forcing the company to book costs of 51 billion yen (US$429 million) for the quarter. The Japanese electronics company had initially said the battery recalls will cost the company between 20 billion yen (US$168 million) and 30 billion yen (US$252 million). Sony spokesman Takashi Uehara said that figure does not include "provisions for possible lawsuits," indicating costs may continue to grow. The woes are the latest troubles battering Sony as it tries to turn around its business after getting beaten by rivals on key consumer electronics products such as digital music players and flat-panel TVs.
Sony left unchanged its fiscal year sales outlook at 8.23 trillion yen (US$69 billion) but lowered its operating profit 62 per cent to 50 billion yen (US$420 million) from the earlier forecast for 130 billion yen (US$1.1 billion). Meanwhile, a 20 per cent price cut in Japan for the basic PlayStation 3 console will decrease earnings for the video game sector, the company said. Last month, Sony announced prices would fall to about US$400, putting the console in the same range as Microsoft Corp.’s (NASDAQ:MFST) basic Xbox 360 with HD DVD player.
There were no plans to lower prices in the United States or other markets. The U.S. price for the basic version is $499; a version with three times the storage capacity goes for $599. The machines are set to go on sale in Japan and in the United States in November, but production delays forced Sony to delay sales in Europe until March. Sony said Thursday those delays will also be costly.
Sony, which is planning to ship six million PlayStation 3 machines by March, has said it will only have 400,000 machines in the United States and 100,000 in Japan for their launches. Retailer GameStop Corp. filled its pre-order slots quickly, in some cases within minutes after they were opened earlier in the month. Meanwhile, Sony said sales and profits for the handheld PlayStation Portable have also been lagging and will push down results.
But Sony said despite such setbacks, it is on its way to a turnaround in its core electronics business because of hit products such as the Bravia liquid-crystal display TVs and digital cameras. Sony has regained some market share in flat TVs with products using displays produced in a joint venture with Samsung Electronics Co. of South Korea. It is still struggling in portable music players, where the IPod from Apple Computer Inc. commands top market share not only overseas but in Japan. Sony shares, which have fallen back after gaining 50 per cent earlier this year, slipped 0.4 per cent in Tokyo to close at 4,790 yen. The forecast revision was announced just after the market closed.
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Headline, Industry News
Sony slashes profit forecast 38%
Thursday October 19th 2006TOKYO (AP) _ Sony (NYSE:SNE) slashed its profit forecasts Thursday because of costs from a massive global recall of laptop batteries and price cuts in Japan for the next-generation PlayStation 3 video game console. Sony Corp. now expects group net profit of 80 billion yen or US$673 million for the fiscal year through March 2007, down 38 per cent from the 130 billion yen or US$1.1 billion it had projected in July.
The revision reveals the deep troubles at the Japanese manufacturer as it tackles a turnaround under its first foreign chief executive, Welsh-born American Howard Stringer. Sony may need to further lower its projections as losses related to the battery recall may grow, said Tatsuya Mizuno, analyst a Fitch Ratings in Tokyo. Toshiba Corp. has said it may demand damage compensation from Sony, and others may follow suit.
"The battery problem is not a simple, one-time problem for Sony because it hurts the company’s reliability as a supplier in its core electronics sector," Mizuno said.
The problem stems from lithium-ion batteries that can short circuit, causing some computers to overheat or even burst into flames. Sony-made batteries have been recalled in recent weeks by U.S. makers Dell Inc. (NASDAQ:DELL) and Apple Computer Inc. (NASDAQ:AAPL), as well as Japanese makers Toshiba Corp., Hitachi Ltd., Fujitsu and Sharp Corp. Sony is recalling its own Vaio laptops, further trimming earnings.
Sony said the recall affects 9.6 million batteries worldwide, including 90,000 in Vaio, forcing the company to book costs of 51 billion yen (US$429 million) for the quarter. The Japanese electronics company had initially said the battery recalls will cost the company between 20 billion yen (US$168 million) and 30 billion yen (US$252 million). Sony spokesman Takashi Uehara said that figure does not include "provisions for possible lawsuits," indicating costs may continue to grow. The woes are the latest troubles battering Sony as it tries to turn around its business after getting beaten by rivals on key consumer electronics products such as digital music players and flat-panel TVs.
Sony left unchanged its fiscal year sales outlook at 8.23 trillion yen (US$69 billion) but lowered its operating profit 62 per cent to 50 billion yen (US$420 million) from the earlier forecast for 130 billion yen (US$1.1 billion). Meanwhile, a 20 per cent price cut in Japan for the basic PlayStation 3 console will decrease earnings for the video game sector, the company said. Last month, Sony announced prices would fall to about US$400, putting the console in the same range as Microsoft Corp.’s (NASDAQ:MFST) basic Xbox 360 with HD DVD player.
There were no plans to lower prices in the United States or other markets. The U.S. price for the basic version is $499; a version with three times the storage capacity goes for $599. The machines are set to go on sale in Japan and in the United States in November, but production delays forced Sony to delay sales in Europe until March. Sony said Thursday those delays will also be costly.
Sony, which is planning to ship six million PlayStation 3 machines by March, has said it will only have 400,000 machines in the United States and 100,000 in Japan for their launches. Retailer GameStop Corp. filled its pre-order slots quickly, in some cases within minutes after they were opened earlier in the month. Meanwhile, Sony said sales and profits for the handheld PlayStation Portable have also been lagging and will push down results.
But Sony said despite such setbacks, it is on its way to a turnaround in its core electronics business because of hit products such as the Bravia liquid-crystal display TVs and digital cameras. Sony has regained some market share in flat TVs with products using displays produced in a joint venture with Samsung Electronics Co. of South Korea. It is still struggling in portable music players, where the IPod from Apple Computer Inc. commands top market share not only overseas but in Japan. Sony shares, which have fallen back after gaining 50 per cent earlier this year, slipped 0.4 per cent in Tokyo to close at 4,790 yen. The forecast revision was announced just after the market closed.
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