Sony Warns of $2.9 Billion Loss, Steps Up Restructuring

Sony warned it would post a record $2.9 billion annual operating loss due to sliding demand and a stronger yen, and unveiled fresh restructuring steps to revive its ailing electronics operations.

The operating loss will be Sony's first in 14 years, underscoring deepening troubles for a company that has fallen behind Apple's [AAPL  82.83    4.63  (+5.92%)   ] iPod in portable music,Nintendo in videogames, and is losing money on flat TVs.

"Sony needs further restructuring, not just cost-cutting but a revamping of its business operations," said Naoki Fujiwara, a fund manager at Shinkin Asset Management.

Sony [SNE  22.58    1.05  (+4.88%)   ] said it now expects an operating loss of 260 billion yen ($2.9 billion) for the year to March, down from an earlier projection for a 200 billion yen profit and far worse than earlier media estimates of a loss of 100 billion yen.

The maker of Bravia LCD TVs and PlayStation game consoles said it would respond by accelerating restructuring, more than doubling a cost-cutting target for the year to March 2010 to 250 billion yen.

Sony said it would end TV production and design operations at one plant in Japan and consolidate those operations into another factory in the country.

It plans to cut headcount by 30 percent in operations related to TV design worldwide.

Other measures include consolidation of resources for batteries and small and mid-size liquid crystal display (LCD) panels, and pay cuts for directors and managers.

It expects restructuring charges to total 170 billion yen through the year to March 2010.

Sony 46" BRAVIA® XBR® series LCD Flat Panel HDTV

Last month Sony outlined a restructuring plan that included curbing investment, closing five to six plants and cutting a total of 16,000 regular and contract jobs globally to save 100 billion yen a year in costs.

But Sony's management, led by Chief Executive Howard Stringer, faced criticism from analysts and investors who said more drastic measures were needed to streamline a sprawling empire that includes semiconductors, movies and insurance.

"Sony has to consider ways to lower fixed costs not only for its TV business but for the whole company. It will have to start cutting development costs in addition to production costs," said Nomura Securities senior analyst Eiichi Katayama.

Sony attributed 340 billion yen of the 460 billion yen swing in its operating forecast to its core electronics division, as the slowing global economy depresses demand for its digital cameras, video recorders and flat TVs.

But it has also been hurt by the slide in the Japanese stock market, which sliced into the value of securities held by its financial unit.

Slower sales in its game and movie divisions have also hit its results.

Illustrating the problems Sony faces, Japanese exports plunged 35 percent in December from a year earlier, with electronics sales to China and other parts of Asia among the worst affected as Western orders to Asian assembly plants dry up.

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