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Sony will report its first operating loss in 14 years with a massive $2.9 billion shortfall

Electronics companies, mobile handset vendors, and electronics retailers are all being added to the growing list of companies that are taking a beating at the heavy hands of a struggling global economy. The latest electronics firm to announce massive losses is Sony.

Sony warned today that it would post a record loss of $2.9 billion due to falling demand for its core electronics and other offerings and a stronger yen. The $2.9 billion loss Sony is warning about is more than twice the amount of loss Sony was expected to report last week.

The massive operating loss is the first in 14 years for the industry stalwart with a massive and diversified portfolio including everything from gaming consoles and computers to movie production and investing arms.

Naoki Fujiwara, a fund manager at Shinkin Asset Management told Reuters, "Sony needs further restructuring, not just cost-cutting but a revamping of its business operations."

In response to the massive loss, Sony is reporting the company will significantly accelerate restructuring plans that were already in motion and more than double its cost cutting goals for January 2009 through March 2010 to 250 billion yen.

Part of these cost-cutting methods will include ending TV production and design operations at one of the firms Japanese plants and consolidating those operations into another Sony plant in Japan. Sony also reports that it plans to shed 30 percent of its workforce in its worldwide TV design operations.

Sony will also be consolidating resources for its battery and small to mid size LCD panel operations along with cutting pay for directors and managers within the company. According to Sony, charges from the cost cutting and consolidation measures will cost it 170 billion yen.

A Sony spokeswoman told the AP that the scale of the proposed payroll cuts had not yet been determined. Sony also says that about 2,000 of the 16,000 jobs it plans to cut will be through early retirement and other programs.

Sony had previously offered details on its restructuring plans that include reduced investing, closing five or possibly six of its plants, and laying off a total of 16,000 employees from regular and contract positions globally. The company says it expects cost savings from its consolidation, closure, and job cuts to total 100 billion yen per year.

Some analysts don’t think that Sony's proposed cost cutting methods are enough. Analyst Eiichi Katayama from Nomura Securities told Reuters, "Sony has to consider ways to lower fixed costs not only for its TV business but for the whole company. It will have to start cutting development costs in addition to production costs."

Not all of the losses Sony has reported can be attributed to its core electronics business. Sony's financial unit has suffered losses thanks to a rising yen and a loss in the Japanese stock market that chopped the value of securities Sony owned. Another big factor is the fact that exports from Japan as a whole dropped 35 percent in December compared to shipments in December of 2007.

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But hey!
By yacoub on 1/22/2009 10:31:12 AM , Rating: 5
Clearly they're still the leader in the console industry though... you know, because they say they are.


( )

RE: But hey!
By Gzus666 on 1/22/09, Rating: 0
RE: But hey!
By tirminyl on 1/22/2009 10:43:45 AM , Rating: 1
Exactly. Sony is more than just gaming. There are other divisions that are causing a huge pain to Sony.

RE: But hey!
By phazers on 1/22/2009 12:29:56 PM , Rating: 4
There are other divisions that are causing a huge pain to Sony.

Yeah - like their battery division :)

I expect their batteries will have 30% smaller explosions from now on..

RE: But hey!
By gstrickler on 1/22/2009 3:07:38 PM , Rating: 2
I expect their batteries will have 30% smaller explosions from now on.
They don't explode, just burn rapidly. The fires will be 30% smaller or cooler now.

Hey, maybe we can use metal-doped LiIon batteries as the fuel source for booster rockets. "Blast-off with Sony. The first company to take you into space."

RE: But hey!
By yacoub on 1/22/2009 10:53:15 AM , Rating: 2
Actually, all I was making light of that Sony fellow's idiotic public statement about the PS3 and Sony being a leader in the console world despite their lack of sales.

You're reading way too much into my simple statement. I'm not tying anything to anything.

RE: But hey!
By yacoub on 1/22/2009 10:58:47 AM , Rating: 2
In case I'm not being clear, I was just making light of how, despite this loss in profit, GEE GUYS AT LEAST THEY'RE STILL THE "LEADER IN THE CONSOLE INDUSTRY" because that's what their moron spokesperson said. I'm just making a dig at what he said because he's clearly a moron. That's all. Two Sony news items. I can't believe I have to explain this to you.

RE: But hey!
By PrinceGaz on 1/22/2009 9:10:30 PM , Rating: 2
I giggled at your comment, because the ridiculous "we're the leading game console manufacturer" comment was the first thing that came to mind when reading the report about their losses.

You shouldn't be rated down for your remarks as you were spot on. If a Sony spokesperson can make wild remarks about their game console success, it is only fair that someone else can make equally wild remarks shooting it down in flames.

Certainly in terms of PS3 console sales (all of which make a loss, hmm, not good for the balance sheet) and how well PS3 games have sold (also a bit lacking compared to other consoles), I doubt the gaming sector has helped Sony very much.

But they do have the PSP as well. Ummm. Forget I said that, it was looking bad enough already.

RE: But hey!
By 67STANG on 1/22/2009 11:49:41 AM , Rating: 2
But couldn't their success at gaming also be part of the reason for the loss? After all, aren't they still losing $50 on every PS3 sold?

RE: But hey!
By Gzus666 on 1/22/09, Rating: -1
RE: But hey!
By omnicronx on 1/22/2009 1:14:22 PM , Rating: 2
You happen to be correct, in fact gaming division losses are less than last year by a factor of 2. Its been the camera and general electronics sales that have gone stagnant in recent months, and of course the value of the Japanese currency does not help either.

RE: But hey!
By afkrotch on 1/22/2009 12:25:53 PM , Rating: 2
Yes, but exactly how much is made back through games/accessories also? There simply isn't enough information to say that the gaming division is the whole reason for the loss.

Don't forget, Sony has also had to have battery recalls in 2008.

RE: But hey!
By darkblade33 on 1/22/2009 2:32:48 PM , Rating: 2
Thing is that PS3's sold and shipped in early 2008 were losing much more then 50 dollars..

Even prices on Bluray players in January 2008 compared to Nov, Dec 2008 decreased considerably.. which maybe also be a reason ?? I know that was one of the three costly components of PS3.

RE: But hey!
By Gzus666 on 1/22/2009 2:40:52 PM , Rating: 2
It was the laser diode, not the drive that was expensive. The rest of the drive is the same as any other, but blue diodes are a bit pricey. Hell, try buying just the diode and you are looking at $50 brand new.

RE: But hey!
By Dove2Three on 1/22/2009 12:35:14 PM , Rating: 2
Just pointing this out, but nowhere in the article is the loss attributed to their gaming division. I get the feeling you didn't read it though.
I get the feeling you didn't either, since the source link says the gaming and TV segments are Sony's loss leaders.

RE: But hey!
By Gzus666 on 1/22/2009 12:39:16 PM , Rating: 2
Reading the source link has nothing to do with the comments section for this article. Now if we were commenting on the site that happened to use the article this was written from, then it would have been valid. As stated, I can only comment on what is given as fact.

RE: But hey!
By Gzus666 on 1/22/09, Rating: -1
RE: But hey!
By Hiawa23 on 1/22/2009 1:37:06 PM , Rating: 2
the article I read on Techradar clearly stated the gaming division is another one of Sony's divisions that are not doing to well. I seriously don't know how Sony is going to drop the PS3's price, & if they do, wow, they are already bleeding, WOW, what a position they have put themselves in but what can they do, no one expected this global recession to hit hard, & I mean it is hitting every business out there. I am looking forward to Killzone 2 but even it's amazing graphics may not give Sony the punch they need.

RE: But hey!
By akugami on 1/22/2009 1:00:03 PM , Rating: 3 article. Sony supposedly losing about $337 million on its games division.

Keep in mind that the PSP is selling really really well considering Nintendo's handheld dominance for the past two decades.

The PS2 continues to be a cash cow selling a decent amount of consoles. New game sales might be a bit slower but still very profitable considering the amount of consoles out on the market. Used game sales should be extremely healthy but this doesn't show up on any company's revenue stream but Gamestop.

With all the money to be made on the PS2 and PSP (I believe their online games such as Everquest are still profitable as well), they still showed a huge loss in their gaming division. I'd say that without the PSP and PS2 propping the PS3 up, they'd likely lose in the $500 million or more range. As it is, PS2 and PSP sales are slowing and THAT is why we're seeing the loss in the games division. The PS3 is not pulling its weight and is an anchor on the whole division.

RE: But hey!
By omnicronx on 1/22/2009 1:18:49 PM , Rating: 2
quote: article. Sony supposedly losing about $337 million on its games division.
Last year it was around 800 million loss for the gaming division if memory serves.

I.E although the gaming division is still in the red, it was other divisions that brought Sony down to this level, as last year they were still overall making a profit, even with an ever larger gaming division loss.

I still don't feel bad for them though, I've said it before and I'll say it again, its about time they got bit in the ass for selling over priced consumer electronics.

RE: But hey!
By darkblade33 on 1/22/2009 2:27:16 PM , Rating: 2
First do you think Sony s going to say in a press release they made a mistake and lost even 1 Billion on PS3? That would only scare investors away.

Fact is even in 2006 when PS2 was still selling well.. PSP was selling much better, and PS3 was just released - so it wasnt a full years of losses ( only the last two months of 2006 were there losses from PS3 ) revenue was 8.2 BILLION (!) from the gaming division alone.

Why in the world is it just so hard to beleive that maybe just maybe since Sony lost a couple hundred or more on each of the 8 million consoles sold in 2008 that just maybe.. theres a TINY TINY chance the gaming division lost more then the company is accustomed to. In fact at one time PS2 was so big it was one of Sony's main incomes.

By the way E ight million consoles sold in 2008 multiplied by the conservative loss of only 150.00 per console ends up being a loss of 1.2 Billion on PS3 hardware.

To be fair I will say maybe half of that could be offset by game sales income. But those of you who think this was all becase Sony didnt sell enough Tv's, DVD payers need to realise The playstation division in the past was a big revenue generator - not the loss it is now.

RE: But hey!
By Gzus666 on 1/22/2009 2:35:52 PM , Rating: 1
First do you think Sony s going to say in a press release they made a mistake and lost even 1 Billion on PS3? That would only scare investors away.

Yea, the same way they post losses for anything. Somehow a loss in one division is OK for them, but admitting loss to another is unheard of?

By the way E ight million consoles sold in 2008 multiplied by the conservative loss of only 150.00 per console ends up being a loss of 1.2 Billion on PS3 hardware.

Uh, wasn't it pointed out they were losing around $50 per console during 2008? And since you have no concrete numbers on what profit they make on everything else they sell, do you think maybe you are talking out of your ass?

RE: But hey!
By darkblade33 on 1/22/2009 3:06:10 PM , Rating: 3
Sony says 336 million of the 2.9 bilion is in fact a gaming division loss. This never happened with PS2.$1262823.htm

According to this article It was even more..

Sony started off in late 2006 losing nearly 300+ a console.

By late mid 2007 it was around 250 dollars... reported in from March 2007 ..

"However, they were priced at US$499 and US$599 respectively,[71] meaning that every unit was sold at an estimated loss of $250,[70] contributing to Sony's games division posting an operating loss of ¥232.3 billion (US$1.97 billion) in the fiscal year ending March 2007

So I guess yeah its follish to beleive it was only 50 dollar loss 6 months later ?

My bad... Sarcasm

RE: But hey!
By darkblade33 on 1/22/2009 3:08:05 PM , Rating: 2
RE: But hey!
By darkblade33 on 1/22/2009 3:10:14 PM , Rating: 2
RE: But hey!
By darkblade33 on 1/22/2009 2:40:59 PM , Rating: 2
Actually SONY says 336 Million of that 2.9 Billion IS IN FACT due to the Gaming Division Losses.

Why is that shocking ?$1262823.htm

Quoting the article " Sony expects an extra 30 billion yen loss, which equates to $336 million/£243 million. Depending on Sony's previous forecast (a previous Games Division forecast is difficult to come by) , the overall operating loss could be higher or lower than 30 billion yen."

RE: But hey!
By Gzus666 on 1/22/2009 2:45:48 PM , Rating: 2
Quoting the same article:

"Sony is expected to post their first net loss in 14 years, of 150 billion yen ( $1.65 billion/£1.21 billion ), for the fiscal year ending 31st March 2009."

RE: But hey!
By itzmec on 1/22/2009 6:16:50 PM , Rating: 2
i have a feeling you didnt read the link he posted

RE: But hey!
By SiliconJon on 1/22/2009 11:16:19 AM , Rating: 2
I see it as a sign of their structural failure. When an executive speaks like that it's a perfect example of the "Dilbert theorem", where the pay is inversely proportionate to the intellegence in a management position.

What I see is a display stating group-think, often described as office politics, is the primary leader in that business structure. Individualism and diversity are not well accepted principles in such a structure as people are often more "successful" by falling into a line that adheres with their superiors and/or coworker populism. This can be anything from government politics, religion, social beliefs, to even more business orientated adherence such as refusal to acknowledge and address operational shortcomings. "Stay the course, and be like us!"

When group-think takes hold great long-term cost is charged, but the mirage of huge short-term booming hypnotises the mass.

RE: But hey!
By BansheeX on 1/22/2009 11:36:37 AM , Rating: 1
Sony's gaming division is the least of their worries right now. The rate at which PS3s are selling is faster than the 360 which leads total sales purely because of its extra year on the market. More exclusives are coming, a $100 cut is coming, Blu-ray beat HD-DVD. It had a lot of growing pains, but it's all over now, so get used to it.

What has no future is their computers, alarm clocks, speakers, mp3 players, phones, insurance, semiconductors, car batteries, cameras, etc. Sony is a sprawling empire that needs to consolidate. I personally still see relevance in OLED investment.

RE: But hey!
By Gzus666 on 1/22/2009 11:39:18 AM , Rating: 2
I personally still see relevance in OLED investment.

You and everyone else. I have been wanting an OLED display for years now. I drool every time I see a hint of one coming to consumers.

RE: But hey!
By Steele on 1/22/2009 7:59:15 PM , Rating: 2
Insurance? Car batteries?!? Sony sells insurance and makes car batteries?

Who the hell would by Sony insurance or Sony car batteries?

RE: But hey!
By audiomaniaca on 1/23/2009 1:07:14 PM , Rating: 2
A kamikaze?

By mindless1 on 1/22/2009 10:41:22 AM , Rating: 2
Tech leader or not, once tech is mature they've been crazy to charge more for their name on a product.

Unfortunately, now we're stuck with BD instead of HD-DVD. Is it too late to switch course?

RE: Good
By Bateluer on 1/22/2009 11:53:54 AM , Rating: 2
Why would we want to resurrect the dead and inferior HD-DVD technology? Sony was just one of the many players involved with designing BluRay. If Sony were to go bankrupt, filing chapter 11 or 7, BluRay wouldn't die because there are dozens of other companies and groups supporting the standard, manufacturing players, disks, and publishing content for them.

RE: Good
By Gzus666 on 1/22/2009 11:57:50 AM , Rating: 4
NOOOO! Don't point this out, his whole fanboy world will collapse around him.

RE: Good
By mindless1 on 1/23/2009 11:45:00 PM , Rating: 2
Because it's not inferior. YOU think capacity matters. The rest of us, are not interested in paying a premium and suffering unnecessary addt'l proceeds to sony for what we don't value.

Inferior? You have that backwards. If Sony died, it makes it slighly less of a shame but not so much, because HD-DVD was always the best choice. Please remember, all it had going for it was higher capacity when we didn't need that, when the ultimate quality depends more on the crew, the compression, the amount of advertisements.

BluRay is just a mistake. Paying a premium for a slight difference in capacity is a fools game, we constantly see capacity increases at more moderate price increases year after year. To be stuck with that kind of mistake for as long as we had DVD, is short sighted folly.

By Aloonatic on 1/22/2009 10:44:40 AM , Rating: 4
Only $2.9 Billion loss?

I can lose that in 6 months, you're not trying hard enough Sony.

Yours Sincerely,

Chairman/CEO of almost any bank that you can think of.

By BZDTemp on 1/22/2009 11:06:28 AM , Rating: 1
They are out of practice - remember this is their first loss in 14 years.

I'm sure they will get it sorted. Even if you just look at the console business there are good signs.

- The PS3 is looking good.
- The PSP is selling well.
- The PS2 is still selling well.

The 360 may be ahead but SONY has time and the 360 is starting to look old. Combine the PS3+PSP and you got some pretty cool moves and add the PlayTV on top and OH BOY!!

By Hiawa23 on 1/22/2009 6:46:17 PM , Rating: 1
The 360 may be ahead but SONY has time and the 360 is starting to look old. Combine the PS3+PSP and you got some pretty cool moves and add the PlayTV on top and OH BOY!!

not sure what you are talking about, I own both consoles & the only thing that matters are the games, & to say the 360 is starting to look old is ridiculous. The only thing old on the 360 compared to the PS3 is the DVD format. The 360 is not competing with the PSP or PS2, but I understand why Sony & many fans want to do the tag team PS2 PS3 PSP vs the 360 comparisons.

By BrockSamson on 1/22/2009 12:34:56 PM , Rating: 1
You should educate yourself. Banks are not losing money. They are fine. Investment firms and such are the ones losing money. There is a big difference.

By Aloonatic on 1/22/2009 5:08:17 PM , Rating: 2
thank yous captain patronising, I will go does thats educatorizing my brain when I canz.

One of the big problems has been the bluing between the two types of financial institution, with high-street banks playing at being investment banks and vice versa. Plenty of banks have been losing a lot of money, at least on this side of the pond.

What These Articles Need...
By kelmon on 1/22/2009 10:54:11 AM , Rating: 4 a picture of Richard Pryor from "Brewsters Millions".

By bmheiar on 1/22/2009 11:25:52 AM , Rating: 3
....along with cutting pay for directors and managers within the company.

Finally a company that gets it &/or understands that there are other things to do and can be done to increase the bottom line & survivability in a bad world economy, instead of just only laying off hourly workers, decreasing production, decreasing product lines & closing plants.

More struggling companies/industries (auto, airlines, retail, banks, manufacturing, & etc) should be willing to cut the salaries of upper management from the CEOs all the way down the line. This would help them run better, if they would cut the millions & billions from the salaries and bonuses that is going to the CEOs, managers, directors, and etc.

Just my opnion & my experience of working retail for 12 years and having to deal with getting my hours cut down to almost half at the beginning of each year right after XMas for 2-3 months or so, just so the store & the managers can make a profit and get their bonuses. I know, because my father was once an manager for 8 years for the same retail company. He would get a 10% bonus each year if his area made a 4% increased profit from the year before.

It is alright to cut the hours and pay for hourly workers who are surviving paycheck to paycheck to paycheck, but the managers are not willing to do the same to help the store be profitable. I am so glad I quit working retail 3 years ago & not working any general public service job, to focus more on finding a job that related to my Electrical Engineering degree. I have been at my job with a power company for over a year now, and liking it. It is so much better than working retail and having to worry about if I will be able to pay my bills on time or which bill I will have to hold off on, because I got my hours cut since the store is not doing so well & the managers are only looking out for themselves and what bonuses are going to line their back pocket & wallets.

By afkrotch on 1/22/2009 12:44:32 PM , Rating: 1
Finally a company that gets it &/or understands that there are other things to do and can be done to increase the bottom line & survivability in a bad world economy, instead of just only laying off hourly workers, decreasing production, decreasing product lines & closing plants.

That's the big thing I liked about the way Sony seems to be handling this.

Sure, much like any other business, they'll get rid of ppl, but it seems they'll try the volunteer approach first. Early retirement is one of the best to try first. From there, you can give out small lump sums for ppl to quit. There's also ppl that hate their job, but don't quit, cause they won't get a compensation package while looking for that new job.

I think the best way to get ppl to quit is to start doing relocations, for no purpose. Can always get ppl to quit that way. "With Iraq becoming a bit more stable, we decided to build a new plant there and you're on the list to relocate. We're giving you a 2 month notice, so prepare for the move." Guaranteed to get plenty of ppl quitting.

Sony may have done some cooking...
By rpierce on 1/22/2009 4:04:07 PM , Rating: 2
Um, first operating loss in 14 years and they are posting a 2.9 billion shortfall? This looks like Sony may have "cooked the books" for a few years. Anyone remember Southland Health Services?

Ok what about...
By mrdeez on 1/22/2009 8:10:36 PM , Rating: 2
The price of all Sonys products are way more expensive than other companies...from thier tv's, projectors, consoles and cameras and BD players for some reason they think we will pay the extra premium because Sony's name is on it. The other thing is they were the industry leader in hand held audio "walkman", but because they were afraid of MP3 files they came late to the game and Apple took over thier once held dominance couple this with the above and a very expensive console (even though it is a steal at 3999 for what it does/has-i own one) and the economy and you have a recipe for disaster. This is only going to get worse not could be up to 5 years or more before this gets better for them.

"We are going to continue to work with them to make sure they understand the reality of the Internet.  A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis
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