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Sony's Stringer May Post Biggest Loss in Two Years, Plans Cuts
April 21 (Bloomberg) -- Howard Stringer cut more than 9,000 jobs and $700 million in annual costs in eight years as head of Sony Corp.'s U.S. operations. Investors want more of the same now he's chief executive of the whole company.
Sony, the world's second-largest consumer electronics maker, will probably post a 70.3 billion yen ($658 million) loss in the quarter ended March 31, the biggest in two years, compared with an 38.2 billion yen loss the year earlier, according to the median forecast of eight analysts surveyed by Bloomberg. The Tokyo-based company reports on April 27.
Investors are counting on Stringer, the 63-year-old media executive who directed Sony's acquisition of Metro-Goldwyn-Mayer Inc., to revive earnings growth amid falling prices of its Wega televisions, DVD recorders and Net Walkman music players. Sony makes about a quarter of the profit of Apple Computer Inc. per employee and 6 percent of those at Samsung Electronics Co.
``Stringer appears to have a good track record in the U.S.,'' said Richard Rothwell, who holds Sony shares in his $1.3 billion Northern International Growth Equity fund at Northern Trust Co. in London. ``We hope that Sony would finally get their act together and release some of the hidden value and restructure the company.''
Shares of Sony have dropped 2.2 percent since March 7, when it named Stringer the company's first non-Japanese CEO and Ryoji Chubachi, 57, as president. The stock outperformed the 5.2 percent decline in the Topix Electric Appliances Index, which tracks shares of Sony, Canon Inc. and 160 other Japanese electronics makers.
Job Cuts
For the year ended March 31, the survey shows net income probably rose 70 percent to 150 billion yen, in line with the company's estimates. Operating profit, or sales minus the cost of goods sold and administrative expenses, probably gained 11 percent to 110 billion yen, according to the survey.
Stringer has said he will follow through with a three-year, 330 billion yen cost-cutting plan introduced by Sony's former CEO Nobuyuki Idei and former President Kunitake Ando in October 2003. The plan includes cutting 20,000 jobs, or about 12 percent of its workforce, by March 2007, and reducing the number of suppliers to 1,000 from 4,700.
Sony has fired at least 185 executives at MGM since its purchase of the studio, the Los Angeles Times reported this month. Sony is expected to cut about 1,300 of 1,500 MGM employees in the coming months as the 81-year-old studio, which owns the James Bond series, stops making and distributing its own movies, the Times reported.
Falling prices of digital electronics may take a further toll on earnings in the year started April 1, says Yuji Fujimori, an analyst at Goldman Sachs Japan Ltd. Profit for this fiscal year will probably be 129 billion yen on sales of 7.4 trillion yen, according to the survey.
Falling Prices
``The outlook is bleak,'' Fujimori said. ``The U.S. economy is showing signs of a slowdown and Sony will probably have to book further charges to accelerate cost cuts.''
The company's operating loss probably totaled 81.3 billion yen in the fiscal fourth quarter, from 109.8 billion yen a year earlier, the survey showed. The electronics business, which makes up two-thirds of total revenue, is set for a second year of operating losses.
Samsung, which earned more than Microsoft Corp. in 2004, and LG.Philips LCD Co. last week reported quarterly profit that missed analyst estimates because of price declines.
Sony's mobile phone earnings may also drop in the quarter after Sony Ericsson Mobile Communications Ltd., the cellular-phone venture with Sweden's Ericsson AB, said profit in the January to March quarter fell 61 percent because of sliding handset prices.
`Next iPod'
The company will also need products like the PlayStation Portable game player, its first foray into the handheld game industry dominated by Nintendo Co., to help the company differentiate its devices, say analysts such as Koya Tabata at Credit Suisse First Boston in Tokyo.
The PSP, as the gadget is known, can also play music and movie files and will be able to surf select Web sites for users to download music and other content when it debuts in South Korea next month.
``There is a possibility that the PSP can turn into the next iPod if it can define itself as more than just a video game player,'' said Tabata, an analyst at Credit Suisse First Boston in Tokyo who rates Sony shares ``outperform.''
In the first week of U.S. sales in March, the company sold more than 500,000 units of the handheld gadget, which came with a copy of Sony Picture Entertainment's ``Spider-Man 2'' movie. Sony has sold about 1.2 million units in Japan since a December debut.
Digital Library
The movie unit is making digital copies of its movies and television shows so filmmakers can use them more easily in DVDs, digital cable and Internet downloads, Senior Vice President Jeff Hargleroad told the Los Angeles Times this week. Sony expects to have 80 percent of its video collection in digital format within a year, Hargleroad said.
``Stringer could help the synergy between the electronics and entertainment units,'' said Yuuki Sakurai, who helps manage the equivalent of $4.7 billion of Japanese equities, including Sony shares, at Fukoku Mutual Life Insurance Co. in Tokyo. ``Success will hinge on whether it can weather the price declines and come out with a hit product like the Apple iPod.''
Sony's Stringer May Post Biggest Loss in Two Years, Plans Cuts
April 21 (Bloomberg) -- Howard Stringer cut more than 9,000 jobs and $700 million in annual costs in eight years as head of Sony Corp.'s U.S. operations. Investors want more of the same now he's chief executive of the whole company.
Sony, the world's second-largest consumer electronics maker, will probably post a 70.3 billion yen ($658 million) loss in the quarter ended March 31, the biggest in two years, compared with an 38.2 billion yen loss the year earlier, according to the median forecast of eight analysts surveyed by Bloomberg. The Tokyo-based company reports on April 27.
Investors are counting on Stringer, the 63-year-old media executive who directed Sony's acquisition of Metro-Goldwyn-Mayer Inc., to revive earnings growth amid falling prices of its Wega televisions, DVD recorders and Net Walkman music players. Sony makes about a quarter of the profit of Apple Computer Inc. per employee and 6 percent of those at Samsung Electronics Co.
``Stringer appears to have a good track record in the U.S.,'' said Richard Rothwell, who holds Sony shares in his $1.3 billion Northern International Growth Equity fund at Northern Trust Co. in London. ``We hope that Sony would finally get their act together and release some of the hidden value and restructure the company.''
Shares of Sony have dropped 2.2 percent since March 7, when it named Stringer the company's first non-Japanese CEO and Ryoji Chubachi, 57, as president. The stock outperformed the 5.2 percent decline in the Topix Electric Appliances Index, which tracks shares of Sony, Canon Inc. and 160 other Japanese electronics makers.
Job Cuts
For the year ended March 31, the survey shows net income probably rose 70 percent to 150 billion yen, in line with the company's estimates. Operating profit, or sales minus the cost of goods sold and administrative expenses, probably gained 11 percent to 110 billion yen, according to the survey.
Stringer has said he will follow through with a three-year, 330 billion yen cost-cutting plan introduced by Sony's former CEO Nobuyuki Idei and former President Kunitake Ando in October 2003. The plan includes cutting 20,000 jobs, or about 12 percent of its workforce, by March 2007, and reducing the number of suppliers to 1,000 from 4,700.
Sony has fired at least 185 executives at MGM since its purchase of the studio, the Los Angeles Times reported this month. Sony is expected to cut about 1,300 of 1,500 MGM employees in the coming months as the 81-year-old studio, which owns the James Bond series, stops making and distributing its own movies, the Times reported.
Falling prices of digital electronics may take a further toll on earnings in the year started April 1, says Yuji Fujimori, an analyst at Goldman Sachs Japan Ltd. Profit for this fiscal year will probably be 129 billion yen on sales of 7.4 trillion yen, according to the survey.
Falling Prices
``The outlook is bleak,'' Fujimori said. ``The U.S. economy is showing signs of a slowdown and Sony will probably have to book further charges to accelerate cost cuts.''
The company's operating loss probably totaled 81.3 billion yen in the fiscal fourth quarter, from 109.8 billion yen a year earlier, the survey showed. The electronics business, which makes up two-thirds of total revenue, is set for a second year of operating losses.
Samsung, which earned more than Microsoft Corp. in 2004, and LG.Philips LCD Co. last week reported quarterly profit that missed analyst estimates because of price declines.
Sony's mobile phone earnings may also drop in the quarter after Sony Ericsson Mobile Communications Ltd., the cellular-phone venture with Sweden's Ericsson AB, said profit in the January to March quarter fell 61 percent because of sliding handset prices.
`Next iPod'
The company will also need products like the PlayStation Portable game player, its first foray into the handheld game industry dominated by Nintendo Co., to help the company differentiate its devices, say analysts such as Koya Tabata at Credit Suisse First Boston in Tokyo.
The PSP, as the gadget is known, can also play music and movie files and will be able to surf select Web sites for users to download music and other content when it debuts in South Korea next month.
``There is a possibility that the PSP can turn into the next iPod if it can define itself as more than just a video game player,'' said Tabata, an analyst at Credit Suisse First Boston in Tokyo who rates Sony shares ``outperform.''
In the first week of U.S. sales in March, the company sold more than 500,000 units of the handheld gadget, which came with a copy of Sony Picture Entertainment's ``Spider-Man 2'' movie. Sony has sold about 1.2 million units in Japan since a December debut.
Digital Library
The movie unit is making digital copies of its movies and television shows so filmmakers can use them more easily in DVDs, digital cable and Internet downloads, Senior Vice President Jeff Hargleroad told the Los Angeles Times this week. Sony expects to have 80 percent of its video collection in digital format within a year, Hargleroad said.
``Stringer could help the synergy between the electronics and entertainment units,'' said Yuuki Sakurai, who helps manage the equivalent of $4.7 billion of Japanese equities, including Sony shares, at Fukoku Mutual Life Insurance Co. in Tokyo. ``Success will hinge on whether it can weather the price declines and come out with a hit product like the Apple iPod.''
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