Sony Reports First Annual Loss In 14 Years - InformationWeek

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Sony Reports First Annual Loss In 14 Years

The company reports a net loss of $1.01 billion on revenue of $78.9 billion, prompting more cost-cutting measures.

Sony on Thursday reported its first annual loss in 14 years, caused by a strong yen and a sales slump in its consumer electronics business, prompting the company to announce further cost-cutting measures that include closing more manufacturing facilities.

Sony also said it expected to report a loss for the current fiscal year, which would mark the first time in the company's history that it has reported losses for two consecutive years.

For the fiscal year ended March 31, Sony reported a net loss of $1.01 billion on revenue of $78.9 billion. For the fiscal year ending March 31, 2010, Sony forecast a loss of $1.26 billion.

Sony's latest losses were attributed to the global economic downturn, the strong yen, and aggressive pricing from competitors that often left Sony with the more expensive product. As a result, sales in Sony's electronics business fell 17% from the previous fiscal year, and revenue from its game unit fell 18%. While Sony sold more units of its PlayStation 3 video game console and PlayStation Portable, the company saw a drop in software sales.

As a result of the losses, Sony announced that it was consolidating manufacturing in Japan and would close four additional plants, as well as sell or shutter facilities in France, Indonesia, Mexico, and the United States. Sony in December said it would close about a half dozen manufacturing facilities and cut 16,000 jobs.

While the bad economy has had an impact, Sony's troubles go beyond economic conditions. In the video-game industry, Nintendo outsold Sony with the lower-priced Wii that lacked the advanced technology of the PlayStation 3, but proved far more popular with casual gamers.

In addition, Sony has yet to make a portable media player that can compete with Apple's market-leading iPod. Sony is even losing ground to competitors in its digital camera and LCD TV businesses, which have been strong product lines.

To jump-start its lagging operations, Sony launched a management reshuffle last month that led to chief executive Howard Stringer also taking on the title of president. Stringer has embarked on a restructuring that includes cutting costs by $3.14 billion, which would be achieved in part by moving manufacturing facilities outside of Japan.

The bigger challenge for Stringer is likely to be bringing life back to Sony's product lines. The company has no No. 1 products, like Apple. The CEO has said that the future lies in having devices connected to services over the Web, a lesson learned in competing against Amazon.com's Kindle electronic book reader.

While the Sony Reader was available before the Kindle, the latter outsold the Sony device primarily because of its wireless connection that made it possible for users to buy books and newspaper and magazine subscriptions from Amazon. The Sony Reader has no such connection.


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