Sony Cites Weak 'How Do You Know' in Reporting $3.2 Billion Loss
Sony predicted it will bounce back to a profit of nearly $1 billion in fiscal 2011, after three years of red ink, as the company announced its full-year results in Tokyo Thursday.
TOKYO – Sony predicted it will bounce back to a profit of nearly $1 billion in fiscal 2011, after three years of red ink, as the company announced its full-year results in Tokyo, where it faced further questioning about its online security.
A net loss of 260 billion yen ($3.2 billion), as announced at Monday's hastily-arranged revised earnings forecast, was confirmed for the 2010 financial year that ended on March 31 this year.
Sales at Sony Pictures were down nearly 15% to 600 billion yen ($7.3 billion) for the year due to lower theatrical revenue and the appreciation of the yen. Sony's biggest earners were The Karate Kid, Salt and The Grown Ups, while its biggest flop was How Do You Know.
Sony's television revenue was up thanks to higher income from subscription and advertising at international channels, as well as from program syndication earnings.
The current fiscal year’s operating income in the film unit included a gain on the sale of a stake in premium pay TV business HBO Latin America and a gain from Sony's increased stake in the Game Show Network. The total gain recognized from these deals was $365 million, according to Sony. The film operating profit decreased to $466 million, primarily due to the appreciation of the yen against the dollar. "On a U.S. dollar basis, operating income was almost flat year-on-year as lower home entertainment revenues from motion picture catalog product and the theatrical underperformance of How Do You Know were offset by the higher television revenues mentioned above," Sony said.
The company is forecasting higher sales and operating income across all the pictures segments for the current financial year.
Network Products & Services, which includes Sony's game division, recorded an operating profit of $429 million, after a large loss last year, on revenue of $19 billion, almost unchanged from the previous year. The improved performance was mainly thanks to PlayStation 3 manufacturing cost reductions and better sales of PS3 software.
“We are continuing to prepare for the launch at the end of the year of the PSG portable console,” said CFO Masaru Kato.
The Consumer, Professional & Devices division's performance was improved largely due to better unit sales of LCD TVs and digital theatrical projectors, though this segment was also hit hard by the strong yen.
The conglomerate said that the earthquake and tsunami that struck Japan on March 11 will impact various areas of Sony's businesses, especially LCD TVs which will be hit hardest in the second fiscal quarter of this financial year as part shortages start to make themselves felt when inventory from before the disasters runs out.
Sony listed the manufacturing plants that were affected by the events of March 11, the schedule for returning to full production, and its contingency plans for dealing with the expected shortages of components. The company declined to give a detailed breakdown of how the various product sectors would be financially affected by its supply chain problems.
The company acknowledged the potential power shortages that are expected to hit Japan this summer due to disruption of supplies caused by the ongoing nuclear crisis at Fukushima, could also seriously affect manufacturing capacity.
Despite the various effects of the disaster, Sony is predicting higher overall sales this financial year of 7.5 trillion yen, up 4.4% on the year that ended March 31.
The recent hacking scandals at Sony were the hottest topic at the Q&A session that followed the results, where the company again tried to emphasize its status as victim of the online attacks.
“For the hackers who gained unauthorized access to Sony websites, it was a kind of competition between themselves, rather than any attempt to steal money through illegal use of identities,” suggested CFO Kato.
“As of today, we don't have any confirmation of any financial damage suffered by users of the PlayStation Network,” said Kato. “However, class action suits related to the hacking have been filed, and we don't yet know what the full costs of those will be.”