Sony Corp. slashed its full-year profit forecast 38% in the wake of continuing battery and game-player woes, calling into question the success of turnaround efforts at the electronics icon.
Sony said it will take a 51 billion yen ($428.9 million) charge to cover the costs of a battery recall affecting more than nine million laptop and notebook computers. The previous company estimate of expenses for replacing the lithium-ion batteries, which can overheat and catch fire in some cases, was no more than $255 million.
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The company also raised estimated losses stemming from its much-delayed next-generation PlayStation 3 line of videogame machines, saying the new console will reduce operating profit by $788 million for the year ending March 31. Slated to hit stores next month in Japan and the U.S. but delayed until next year in Europe, PS3 has been by slowed by production problems for a high-definition-videodisc player that is part of the game console.
With the earnings revision, the company said it expected group net profit of $673 million compared with its original forecast of $1.1 billion for the fiscal year. Sony is expected to announce its fiscal second-quarter earnings next week.
The lower forecast raises doubts about how quickly Sony will be able to turn itself around under Howard Stringer, the company’s first non-Japanese chief executive. Once one of the world’s most innovative electronics makers, Sony has fallen behind as Apple Computer Inc. captured the digital-music market with its iPod player and Japanese competitors took large leads in the growing market for flat-screen televisions.
Sony’s manufacturing setbacks have added to those problems.
“We consider manufacturing quality to be the most important aspect of Sony’s business and we are working at improving it,” Nobuyuki Oneda, the company’s chief financial officer. However, Mr. Oneda said the sprawling conglomerate’s electronics business, where much of its problems have been, was on steadily improving and enjoying stronger sales.
The battery recalls began in August when Dell Inc. called back more than four million machines equipped with Sony batteries. Several Japanese computer makers have already said they might seek compensation from Sony in excess of the actual cost of the battery replacements if they find their reputations or sales have been affected by the recall.
Sony’s manufacturing problems with the PS3 will mean lower-than-expected shipments before the holiday selling season. Sony has also cut the price of the machine 20% in Japan in order to address criticism of its high price tag.
Source: WSJ
