News Article

Sony Preparing for Biggest Annual Loss in a Decade

Posted by Sammy Barker

The numbers aren't red enough

We find it hard to believe there’s been a smile on new Sony CEO Kaz Hirai’s face since he started his new high-power role just over a week ago. One look at the company’s balance sheet would be enough to plant a permanent frown on even the most jubilant of personalities.

Indeed, Sony has warned investors today that it expects to announce losses of ¥520billion in its next financial report. To put that figure into perspective, that’s $6.4billion or £4billion according to current exchange rates. In short: an enormous sum of money.

It is, in fact, Sony’s largest financial loss in a decade. It previously reported losses in 2010 and 2008 – neither of which were anywhere near on the same scale as what’s being discussed here.

The reason for the extraordinary loss is due to the write-off of tax credits (primarily in the US) which Sony can no longer use. The company maintains that it expects to start the journey back to profitability next year, with an operating profit of ¥180billion predicted. That’s around $2.2billion.

Of course, to achieve that, former PlayStation president Kaz Hirai is going to have his work cut out. The new CEO is set to reveal his rescue strategy at a conference this week. Around 10,000 job cuts are already predicted.

Sony’s biggest problem at the moment – aside from the troubled yen and its unwieldy corporate culture – is its television business, which is getting stomped by Korean manufacturers such as Samsung. Hirai has promised to turn the business around within two years.

While the task sounds almost insurmountable – Hirai does have form. The executive’s most successful hour was transforming the struggling PS3 into a thriving format through effective cost-cutting and intelligent decision making. Hirai’s overall aim is to unify Sony as a company, blurring the lines between each of its branches and transforming it into a powerful whole.

There's certainly a long, long road ahead – but in Kaz we believe.

[via reuters.com]

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User Comments (7)

XCWarrior

#1

XCWarrior said:

Lot easier to first comment here. I would say no chance of PS4 announcement this year. You can't bring out another system that will bring a loss on every unit sold when the PS3 is probably just now turning a profit on each sale.

But I'm thinking logically, which Sony does not always do.

DrCruse

#2

DrCruse said:

He can start by getting rid of the proprietary peripheral policy that Sony seems to have. E-readers, sound recorders, MP3 players and the PS Vita all have junk like proprietary USB cables, memory cards, etc, which is the main thing always holding me back from buying Sony products.

Ginkgo

#3

Ginkgo said:

You can't tell me that the US tax write-offs are a surpirse. The loss to me looks like a new CEO taking the opportunity to clean house, expose all the nasties that had been hidden for ages and blame it all on the last guy. I know I would!

Take the hit now while it is not his fault and then look good next year when he turns it around.

Sony is big enough with enough new tech coming out that it can turn this around with some clear thinking. The Vita shows they are clearly not a company who has run out of ideas.

But I agree they have had a pricing policy and proprietry tech based on a market position in the past that they can no longer claim. At the moment only Apple has that status. Time will tell...

autogolazzo

#4

autogolazzo said:

@DrCruse Tell that to the most profitable and (arguably) successful company in the world: Apple.

Everything they do is proprietary. How do you hook an iPod up to a computer? With a proprietary ipod to usb jack. How do you transfer ANYTHING on your computer to an ipod? Through a proprietary app called itunes. You want to make an app for their app store? Great, first get a dev license and then submit your app. Will they accept it? Who knows? You want to create your app in Adobe Flash? Great, go for it! No, wait, you can't -we'll block it. No wait, you can. We're losing money to android and need as many apps as we can get.

With PS3, I like that I can charge my controllers on a PS3 via usb. Can you do that with other systems (I don't know)? I can charge them on my computer. Not very proprietary.

NathanUC

#5

NathanUC said:

It's all about product hype. Sony just doesn't have hype anymore. For the amazing product that is Vita, people just don't acknowledge it for what it is. Companies like Apple and Nintendo could sell a polished turd because of hype and lock-in value.

One problem is that while Sony had an AMAZING year last year in terms of quality games, it was difficult to sell consumers so many games in a short amount of time. I know I passed on a few different AAA titles just because I have so many games that are still unplayed in the shrink wrap. Even if Microsoft only had one or two good first party games last year, those games had hype and I would argue a higher % of Xbox owners purchased said games.

TL;DR: Same quality games, less frequent and more hype = problem solved. Easier said than done though

get2sammybAdmin

#6

get2sammyb said:

@nathanuc1988 It's a tough one isn't it? I agree with the sentiment of what you're saying — Sony's marketing budget is spread so thin across so many games that it's never quite able to produce that Halo-esque hit. But as the same time, as a gamer, I absolutely adore the variety PlayStation gives me.

As great as they were, I would have been disappointed if last year's line-up was just Killzone 3 and Uncharted 3.

ShogunRokAdmin

#7

ShogunRok said:

@nathanuc1988

I would have to agree, Sony need to big up their star games. It's all good for gamers like us, getting a bunch of exclusives every year, but at the same time they get swallowed up in the hype of other games. It's becoming clear that hype is quite possibly the key ingredient to selling a game. It's always a risky business but if you can get the hype juuuust right, people go mental for what you're selling. Pretty sad state of affairs in a lot of ways

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