Floods in Thailand and a strengthening yen are hurting Sony's profitability, the company said this week.
Sony Corp. recently altered its annual loss forecast, affirming that the company's profit would be lower than expected. Japan-based Sony suffered through a difficult year in 2011, as the company had to rework supply chain management in the wake of historic flooding in Thailand, where a number of its suppliers are located. Procurement audits revealed its supplier network was more affected than it initially believed, with the drop in Thai manufacturing capacity fueling losses.
Sony also said the strong yen had prompted its profit outlook adjustment. The Japanese currency has gained against the U.S. dollar over the past year, making it more expensive for Sony – and other Japanese companies – to produce products in domestic manufacturing plants. Other Japanese firms, including Toyota, Honda and Nissan, have also cited the strong yen as a major impetus for production adjustments.
What's more, Sony said its decision to exit a display panel joint venture with Samsung had further crimped profitability. While analysts said it would likely save the electronics giant in the long-term, they conceded the move would hurt its fiscal year profit and operating margins.
Sony increased its annual loss forecast to $220 billion from only $90 billion in November, Bloomberg reports. The company's fiscal year ends in March and it will likely post its fourth consecutive profit loss, according to the news provider.
Sony has a significant amount of work to accomplish as it charts a path toward profit growth, according to Atlantis Investment Research president Edwin Merner. Sony could work with supply chain management and consulting firms, and it will likely have to implement sweeping business cost reduction initiatives in an attempt to improve efficiency.
"Sony is a very weak company," he said. "To turn around at this time will be very, very difficult. As they go downhill, they pick up speed."
Incoming Sony chief executive Kazuo Hirai will oversee the company's shifting business strategy, and he said this week that the firm intended to maintain a sales target of 20 million television sets annually.
"Televisions are important as an output device," he said. "Withdrawing or shrinking would cut a link for customers to experience" the company's content.
Sony said Thursday sales fell 17.4 percent to $23.4 billion in its third quarter, which ended December 31. The company also posted a $2 billion net loss in its most recent fiscal quarter, down precipitously from the $950 million gain it logged the same period the year prior. Hirai said that the company was forced to slash prices of television models to keep pace with rivals, hurting profit margins in the formerly profitable segment.
Sony's film business remained robust even amid an overall weak quarter, according to the company. Revenue at Sony Pictures Entertainment climbed 7.7 percent in the third quarter to $2.1 billion. The company's film division also posted a $9 million profit, as its theatrical releases performed well at the box office.
Hirai plans to institute a company-wide cost reduction campaign over the course of the next year. He said the electronics giant must overhaul its business model in order to compete in an increasingly crowded market place.
"Unless we steer drastically toward reform, we may confront a situation where decision-making comes with enormous pain," Hirai asserted. "If we hold back, we cannot take a step forward."
Sony Corp. recently altered its annual loss forecast, affirming that the company's profit would be lower than expected. Japan-based Sony suffered through a difficult year in 2011, as the company had to rework supply chain management in the wake of historic flooding in Thailand, where a number of its suppliers are located. Procurement audits revealed its supplier network was more affected than it initially believed, with the drop in Thai manufacturing capacity fueling losses.
Sony also said the strong yen had prompted its profit outlook adjustment. The Japanese currency has gained against the U.S. dollar over the past year, making it more expensive for Sony – and other Japanese companies – to produce products in domestic manufacturing plants. Other Japanese firms, including Toyota, Honda and Nissan, have also cited the strong yen as a major impetus for production adjustments.
What's more, Sony said its decision to exit a display panel joint venture with Samsung had further crimped profitability. While analysts said it would likely save the electronics giant in the long-term, they conceded the move would hurt its fiscal year profit and operating margins.
Sony increased its annual loss forecast to $220 billion from only $90 billion in November, Bloomberg reports. The company's fiscal year ends in March and it will likely post its fourth consecutive profit loss, according to the news provider.
Sony has a significant amount of work to accomplish as it charts a path toward profit growth, according to Atlantis Investment Research president Edwin Merner. Sony could work with supply chain management and consulting firms, and it will likely have to implement sweeping business cost reduction initiatives in an attempt to improve efficiency.
"Sony is a very weak company," he said. "To turn around at this time will be very, very difficult. As they go downhill, they pick up speed."
Incoming Sony chief executive Kazuo Hirai will oversee the company's shifting business strategy, and he said this week that the firm intended to maintain a sales target of 20 million television sets annually.
"Televisions are important as an output device," he said. "Withdrawing or shrinking would cut a link for customers to experience" the company's content.
Sony said Thursday sales fell 17.4 percent to $23.4 billion in its third quarter, which ended December 31. The company also posted a $2 billion net loss in its most recent fiscal quarter, down precipitously from the $950 million gain it logged the same period the year prior. Hirai said that the company was forced to slash prices of television models to keep pace with rivals, hurting profit margins in the formerly profitable segment.
Sony's film business remained robust even amid an overall weak quarter, according to the company. Revenue at Sony Pictures Entertainment climbed 7.7 percent in the third quarter to $2.1 billion. The company's film division also posted a $9 million profit, as its theatrical releases performed well at the box office.
Hirai plans to institute a company-wide cost reduction campaign over the course of the next year. He said the electronics giant must overhaul its business model in order to compete in an increasingly crowded market place.
"Unless we steer drastically toward reform, we may confront a situation where decision-making comes with enormous pain," Hirai asserted. "If we hold back, we cannot take a step forward."
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