|Sony Posts Record Loss After Taking $3.7 Billion Tax Charge, Monday, 10 Apr 2012|
(Bloomberg) Go Sony Corp. (6758) posted a record 520 billion yen ($6.4 billion) loss after taking a charge to write down deferred tax assets as it loses ground to Apple Inc. (AAPL) (AAPL) and Samsung Electronics Co. (005930) in music players and televisions. The preliminary loss for the year ended March 31 is more than double the Tokyo-based company's forecast in February, it said in a statement today. Shares traded in Germany fell 5 percent to 14.61 euros. The loss underscores the challenge for President Kazuo Hirai, 51, in turning around the company that set the trend in electronics during the 1980s with products like the Walkman music player. Hirai, who succeeded Howard Stringer this month, has said he will close down less-competitive businesses and cut costs to revive Sony. The company predicted net income of 180 billion yen for the fiscal year that began this month, the first profit in five years.
"Given the tax charges, Sony's revival and growth plans in the U.S. don't seem to be working out," said Satoshi Yuzaki, a general manager at Takagi Securities (8625) in Tokyo. "The market is very skeptical about the outlook for the company over the next three to five years." The maker of Vaio computers and PlayStation game players fell 3.5 percent to 1,586 yen in Tokyo trading today, before the announcement. That's the lowest level for the stock since Feb. 15, according to data compiled by Bloomberg. The shares have gained 15 percent this year after slumping 53 percent last year.
Sony plans to take a charge of about 300 billion yen for writing down the value of deferred tax assets, predominantly in the U.S., according to the company statement. The loss is the worst for Sony since it was founded in 1946 as Tokyo Telecommunications Engineering Corp., according to Mami Imada, a spokeswoman. "It's only been two months since Sony cut forecasts last time," said Nobuo Kurahashi, an analyst at Mizuho Financial Group Inc. in Tokyo "Given the general trend that orders and sales improved this past quarter, it's unclear what could have changed so dramatically. Overall, the impression of today's announcement is very bad." Hirai is scheduled to outline his turnaround plan on April 12. Sony, worth more than $125 billion in 2000, is now valued at $20 billion, compared with $591 billion for Cupertino, California-based Apple and $170 billion for Suwon, South Korea- based Samsung.
The new CEO, who's been credited with making the PlayStation game business profitable, is bringing in a new team and has put himself in charge of Sony's TV business, which is forecast to lose money for an eighth consecutive year. The loss comes as the company plans to cut as many as 10,000 jobs, according to the Nikkei newspaper. George Boyd, a spokesman for Sony, declined to comment a report. Hirai has already taken action in an effort to boost the TV business. Last year, Sony exited a panel-making venture with Samsung, saying the sale of that stake to the South Korean company will save about 50 billion yen in costs for Sony's TV operation.
Sony is not the only Japanese electronics company forecasting worsening losses. Osaka-based Sharp Corp. (6753) and Panasonic Corp. (6752) are also forecasting losses as they lose ground to Samsung and LG, who both sell televisions profitably. Sharp, predicting its worst loss since founding a century ago, also said in February that losses were exacerbated by deferred tax assets. Companies need to reduce deferred assets and take appropriate charges when they forecast a loss. Standard & Poor's cut Sony's credit rating one level in February to BBB+, S&P's third-lowest investment grade, because of falling prices, waning demand and tougher competition. The announcement followed downgrades by Moody's and Fitch Ratings, which cited difficulty in turning around the unprofitable TV business.
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