Sony on Wednesday by warning it is heading for its fourth straight annual net loss and that its TV business alone would produce a loss of $2.2 billion due to tumbling demand and a surging yen.
The company cut its sales forecast for TVs, cameras and DVD players on Wednesday and said it may report 90 billion yen ($1.1 billion) net loss in the current financial year, scrapping its earlier net profit estimate of 60 billion yen.
Sony has embarked on a series of measures to improve the profitability of its television business, with the aim of returning the business to profitability in the fiscal year ending March 31, 2014.
In its mid-range plan announced in November 2009, Sony outlined plans to create a structure under which the Company could attain a market share of 20%, or 40 million unit sales in the fiscal year ending March 31, 2013, based on the expectation that the LCD TV market would continue its high level of growth. However, since then, market conditions have changed drastically, with overall industry growth slowing, and developed countries experiencing negative growth, especially in the U.S. and Europe where economic conditions have deteriorated. Furthermore, while there was an LCD panel shortage at the time of the mid-range plan announcement, there is now a surplus of LCD panels in the market. In view of these changes, Sony said it expected TV losses to be 175 billion yen ($2.2 billion) this financial year, including a 50 billion yen impairment charge. It cut TV sales forecast by 9 percent to 20 million sets, its second reduction this year.
Sony plans to engage in further fixed cost reductions as its TV operations transition from a 40 million to 20 million unit structure; however, due to the "asset-light" strategy already carried out across Sony?s manufacturing facilities, substantial reductions in fixed costs have already been achieved. Therefore, Sony considers reducing variable costs, of which LCD panels comprise the largest proportion, to be its priority going forward.
Sony plans to reduce of LCD panel costs and enhance product competitiveness by offering models designed specifically for the needs of developing countries, reducing inventory turnover, deploying technologies such as super-resolution high image quality engines and accelerate the development of a next generation TV. The company also plans to provide consumers with an integrated user experience across multiple devices and network services.
Sony did not to comment on reports it would end a panel joint venture with Samsung Electronics.
Panasonic and Philips are also losing money from TV sales, hit by faltering demand and growing competition from low-cost producers.
Philips agreed on Tuesday
to transfer its loss-making TV business into a joint venture with TPV Technology.