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Sony profits have plunged 95 percent in the October-December quarter with buyers backing away from purchasing the company’s Bravia TVs. Also hit was its gaming and mobile phone partnership with Ericsson. Now the company is set to slash an additional 8,000 jobs.
Even worse for Sony was the fact that this was the big Xmas buying period of the year, when the Company expected to generate over half of their total revenues. Now there is talk of big price cuts for the PS3 gaming console and their digital camera range as Sony desperately tries to shift stock inventory.
Ironically Sony Australia who is profitable is struggling from a lack of TV flat screen stock.
Late last night Sony said that net profits had shrunk to 10.4 billion yen (A$177.85 million) in the third quarter from 200.2 billion yen a year earlier. Revenue fell 25 percent to 2.15 trillion yen.
Sony has also forecast a whopping full-year operating loss of A$4.46 billion for the fiscal year ending March, which would mark the company’s first operating loss since it went public in 1958. It last posted a loss in 1995, on a one-time charge related to its film division.
Sony’s electronics division posted an operating loss of 15.9 billion yen, versus a 200.6 billion yen profit a year earlier. Film revenues declined by 21.8%, despite the successful movie release of Quantum of Solace, partly because the previous year’s home entertainment release of Spider Man 3 did even better.
Sony also said that due to the poor economic conditions, it would postpone by a year establishing a joint venture with Sharp to make liquid crystal display panels for thin-screen TVs, and now aims to do so by March of 2010.
The company has repeatedly warned of its troubled finances over the past few weeks, and the dismal numbers were in line with analysts’ forecasts. But many said the weakness in electronics was a troubling sign, as the division has long been a source of steady profits, even as other areas struggled.
David Gibson, an analyst at Macquarie in Tokyo, pointed to a buildup in Sony’s inventories as it failed to move its products.
“TVs really dragged them down during the period,” he said.
The poor showing in electronics caused Sony’s operating profit, which is generally seen as the best indication of a company’s pure business performance but excludes taxes and other items, to fall to a 18 billion yen loss during the quarter.
Sony generates nearly 80 percent of its sales abroad, making it vulnerable to a strong yen, which cuts into its profits from overseas. Japan’s currency has hovered near 90 yen to the dollar in recent months after rising as high as 117 yen last year. So far this fiscal year foreign exchange movements have taken about 216 billion yen from its operating income, it said.
