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Earnings: Sony Expects First Full-Year Loss In 14 Years; Will Restructure Games, Music, Movies Units

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Sony (NYSE: SNE) revised downward its forecasts for the second time in four months, saying it will suffer a net loss of 150 million yen ($1.68) for the year ending March 31 due to the economic downturn and falling electronics and games spending. The new forecast represents Sony’s first full-year loss in 14 years and is 200 percent lower than its recent October forecast of 150 billion yen — itself a downward revision of July’s forecast. Sony also cut its annual sales forecast by 14 percent from 9,000 billion yen ($100.73 billion) to 7,700 billion yen ($86.18 billion).

In a series of statements to the Tokyo stock exchange, the company said it plans to save 250 billion yen ($2.8 billion) before 2010 and will extend a restructuring program across the company. A sign that things are really bad: Sony’s three CEOs will waive their entire bonus entitlement for the 09/10 financial year; managers will also see salary and bonus reductions.

Sony’s response to all this is radical: on top of the 8,000 full-time and 8,000 agency and part-time jobs it had already planned to cut by 2010, saving $1 billion, the company now promises to “accelerate these actions.” The games, music and pictures businesses will all be restructured at a cost of 170 billion yen ($1.9 billion), and there will be “significant cost reductions” in advertising and other budgets. The company is shutting down production centers in France, Slovakia and Japan and will outsource aspects of software development to places like India. Sony’s TV design division will have 30 percent less staff by March 2010. More after the jump…

Electronics & games: Electronics income will be 340 billion yen ($3.81 billion) lower than Sony’s previous forecast. Though blamed the economy and more price competition, 40 billion yen ($447 million) is also blamed on the yen’s strength, 30 billion yen ($335 million) due to restructuring and 20 billion yen ($223 million) down to loss of income through sale of companies. Games sales are generally expected to weather the downturn better than most other sectors, but Sony’s games division will still make 30 billion yen ($335 million) less than was forecast in October, half of which due to lower than expected sales.

Explaining the downturn: So what’s going wrong? Apart from the general malaise in world markets,sales of consumer gadgets are “significantly lower” than was forecast in October as major markets in Europe and American head towards recession. But the company has also been hit a lack of competitiveness from the continued strength of the yen, currently at a 13-year high against the dollar — around 80 percent of the company’s sales come from overseas so it is badly affected by currency fluctuations. Higher than expected restructuring charges (read: redundancy payments) and, increased competition and the decline of the Japanese stock market also contributed.

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