Jan. 25 (Bloomberg) — Sony Corp., the world’s second-largest maker of consumer electronics, will probably revise its annual forecast to a profit from a loss on higher holiday season sales of Bravia flat-screen televisions and digital cameras.
Chief Executive Howard Stringer may raise the Tokyo-based company’s forecast to a 48.9 billion yen ($427 million) net income from a 10 billion yen loss, according to the median forecast of the six analysts surveyed by Bloomberg. Profit for the quarter ended Dec. 31 probably fell 56 percent to 62.8 billion yen because of costs to cut jobs, the survey showed.
Matsushita Electric Industrial Co. and Sharp Corp. may join Sony in raising full-year profit outlooks when they report earnings next week. The three companies are increasing spending in factories to meet rising demand for large TVs spurred by sporting events such as the Winter Olympics and World Cup soccer tournament.
“You’re going to see very strong growth in Europe over the coming six months, with the World Cup obviously helping,” said Stephen Hall, who helps oversee the equivalent of $572 million at Britannic Asset Management in Glasgow, Scotland. “I’m bullish on flat-screens.”
Stringer, 63, is making progress on his pledge to eliminate 10,000 jobs and cut the number of gadgets that the company makes to boost earnings at its consumer electronics business.
Sony this week said it may cut about 900 jobs, 700 of them in the U.S., and shut two U.S. factories that make cathode-ray tube TV parts. It will also shutter a plant in Japan that made the original Walkman music player in 1979 and shift production to Malaysia and China.
Profit Forecast
Shares of Sony have gained 35 percent since the start of the third quarter, outperforming a benchmark of Japanese technology companies. The 162-member Topix Electric Appliances Index gained 21 percent since Oct. 1, while the broader Topix Index advanced 15 percent. Sony’s stock has tumbled 69 percent from its 16,300 yen peak in March 2000.
Sony reports earnings tomorrow at 3 p.m. Japan time, followed by Sanyo Electric Co. and Pioneer Corp. on Jan. 31. Sharp will announce its earnings on Feb. 1 and Matsushita, the maker of Panasonic-brand electronics, on Feb. 2.
Sales at Sony are expected to gain 0.2 percent to 2.15 trillion yen in the quarter, according to the survey. Operating profit may fall 20 percent to 110 billion yen on charges for job cuts and other restructuring costs, analysts in the survey said.
Sony’s share of Japan’s LCD television market rose to 28 percent in December, almost doubling from October, according to a Jan. 17 report from Tokyo-based market researcher BCN, which tracked sales at retailers over the holiday season.
Movie Slump
“The electronics business will probably exceed the company’s forecasts, as higher sales of LCD televisions probably helped earnings,” said Kazuharu Miura, a Tokyo-based analyst at Daiwa Institute of Research. “The biggest risk is how much earnings at the movie business is likely to fall.”
Sony’s movie business may disappoint as films such as “Memoirs of a Geisha” and “Zathura” failed to win over audiences. “Memoirs,” based on the book by Arthur Golden, ranked sixth in box office sales in the weekend before Christmas, according to box-office tracker Exhibitor Relations Co.
A key to Sony’s revival is its LCD panel-making venture with Samsung Electronics Co., which allows Sony to procure its own screens and lower production costs. Sony in November said it will invest 10 billion yen in the S-LCD Corp., the venture set up in April 2004, to raise panel output by 25 percent.
“We’re seeing some progress in Sony’s pricing strategy as they are able endure the pricing cuts from making their own panels,” said Mitsuhiro Osawa, an analyst at Mizuho Investors Securities Co. The venture “may help Sony beat its target to be profitable before the second half of 2007.”
Raising Investment
Sharp and Matsushita are also raising investments ahead of the anticipated demand this year. The 64 games at the soccer World Cup in Germany starting June 9 will draw an average of almost 500 million viewers per match, according to estimates by FIFA, the sport’s ruling body. The 2006 Olympic Winter Games will be held in Turin, Italy, from Feb. 10.
Sharp, the world’s biggest maker of LCD TVs, this month said it will raise capital investment by 25 percent to 275 billion yen to help pay for the world’s biggest LCD panel-making factory. The Osaka-based maker of Aquos-brand televisions will probably say profit rose 22 percent to 25.5 billion yen, the survey showed.
The analysts expect the company to keep its full-year profit forecast unchanged at 87 billion yen, a third annual record.
Matsushita, based in Osaka, will probably say profit gained 48 percent to 52.7 billion yen, the survey showed, and expect to raise full-year profit forecast to 137.5 billion yen, compared with the company’s estimate of 110 billion yen.
Television Expansion
“Winning in the industry will depend on whether these manufacturers can be the first to strike with investments,” said Nobuyoshi Tsumori, a strategist at Barclays Global Investors Ltd., which manages more than $88 billion in Tokyo. “Margins on these electronic products drop the second they hit the market.”
Price declines, while they can dent margins, are also making the flat-screen televisions more affordable for consumers and helping spur growth.
Global shipments of LCD televisions this year will rise 60 percent to 31.4 million units this year, market researcher ISuppli Corp. said on Jan. 6. DisplaySearch, another research firm, said the value of the flat-panel market will rise 14 percent to about $85 billion this year.
Samsung and LG.Philips LCD Co., the world’s two biggest makers of LCD panels, said earlier this month their newest LCD factories started production ahead of schedule to meet demand.
Sanyo, Pioneer
Elsewhere, Sanyo, the world’s largest maker of rechargeable batteries, will probably report a 34 billion yen loss in the fiscal third quarter, the fifth straight quarterly loss, as it took on costs to cut jobs and sales of mobile phones, digital cameras and household appliances dropped, according to the Bloomberg survey.
Pioneer will probably post a fourth straight quarterly loss, reporting a 3 billion yen loss compared with a 1.8 billion yen profit a year earlier. Pioneer, which makes car navigation systems and plasma displays, last month said it will cut 2,600 jobs and cut research spending as it heads for a record annual loss.
The following tables show the median of analysts forecast for fiscal third-quarter earnings and full-year, as compiled by Bloomberg News. Figures are in billions of yen, and the percentage changes are from the same period a year earlier.
Table 1: Fiscal Third-Quarter Forecasts
Sony Sales Op Net
—————————————
Median 2,153.25 110.00 62.75
Previous 2,148.19 138.17 143.81
YOY 0.2% -20.4% -56.4%
—————————————Sanyo Sales Op Net
—————————————
Median 638.00 4.00 -34.00
Previous 620.65 10.36 -17.62
YOY 2.8% -61.4% n/a
—————————————Pioneer Sales Op Net
—————————————
Median 208.00 -1.60 -3.00
Previous 196.30 1.63 1.79
YOY 6.0% n/a n/a
—————————————Sharp Sales Op Net
—————————————
Median 723.00 45.00 25.50
Previous 650.61 36.46 20.88
YOY 11.1% 23.4% 22.1%
—————————————Matsushita Sales Op Net
—————————————
Median 2,372.8 125.00 52.70
Previous 2,296.5 88.25 35.57
YOY 3.3% 41.6% 48.2%
—————————————Table 2: Full-year Forecasts
Sony Sales Op Net
———————————————–
Median 7,140.00 79.80 48.85
Company Forecast 7,250.00 -20.00 -10.00
Year Ago 7,159.62 113.92 163.84
———————————————–Sanyo Sales Op Net
———————————————–
Median 2,493.55 -19.00 -234.50
Company Forecast 2,440.00 -17.00 -233.00
Year Ago 2,484.64 42.32 -171.54
———————————————–Pioneer Sales Op Net
———————————————–
Median 757.00 -26.00 -86.60
Company Forecast 770.00 -25.00 -87.00
Year Ago 733.65 2.59 -8.79
———————————————–Sharp Sales Op Net
———————————————–
Median 2,749.40 160.00 87.00
Company Forecast 2,750.00 160.00 87.00
Year Ago 2,539.86 151.02 76.84
———————————————–Matsushita Sales Op Net
———————————————–
Median 8,811.90 390.00 154.60
Company Forecast 8,720.00 330.00 110.00
Year Ago 8,713.64 308.49 58.48
———————————————–
To contact the reporter on this story:
Daisuke Takato in Tokyo at dtakato@bloomberg.net
