Sony reports $1.26-bn full-year net loss

Struggling Japanese electronics giant Sony registered a loss of $1.26 billion in the fiscal year ended 31 March 2014, held down by costs tied to its exit from the personal computer business as part of a painful restructuring.

Earlier this year, Sony said it was selling its Vaio-brand PC division to a Japanese investment fund as it plans to concentrate on its line-up of smart phones and tablets (See: Sony agrees to sell PC business to Japan Industrial Partners).

Sony, once the world's top consumer electronics company, booked a whopping loss of ¥128.37 billion ($1.26 billion), and forecast a lower, ¥50 billion, net loss in the current fiscal year to March 2015, as it losses in its hard-hit television business narrow.

Consolidated sales and operating revenue was ¥7.76 trillion, an increase of 14.3 per cent compared to the previous fiscal year. The increase was primarily due to the favourable impact of foreign exchange rates, the launch of the PlayStation4 (PS4), as well as a significant increase in sales of smart phones, the company said.

On a constant currency basis, sales decreased 2 per cent year-on-year.

Operating income decreased ¥200 billion year-on-year to ¥26.5 billion. This significant decrease was primarily due to a year-on-year decrease in gains on the sale of assets and remeasurement gains, a recording of ¥91.7 billion in losses related to the PC business, including restructuring charges, compared to ¥38.6 billion in PC business-related losses recorded in the previous fiscal year, and a recording of impairment charges in the battery business and in the disc manufacturing business.

Sony said this decrease was partially offset by the favourable impact of foreign exchange rates, a significant improvement in operating results in the mobile phone business and a significant decrease in loss in televisions.

Of the ¥91.7 billion in losses related to the PC business in the current fiscal year, ¥58.3 billion were costs related to the decision to exit the business, of which ¥45.5 billion was recorded in the mobile products and communications segment and ¥12.8 billion was recorded in corporate and elimination.

The ¥12.8 billion represents restructuring costs related to reducing the scale of sales companies resulting from Sony's exit from the PC business. Of the ¥58.3 billion, ¥40.9 billion was recognised as restructuring charges, and the remaining ¥17.4 billion was an expense primarily for the write-down of excess components in inventory.

Sony announced the results a day after it said it would not pay bonuses to senior executives for the third straight year.

Sony also had warned that it would lose more than the ¥110 billion shortfall it had forecast just three months ago, when it said it would cut 5,000 jobs in its struggling computer and television units.

Moody`s has downgraded its credit rating on Sony to junk, saying the company must do more to repair its battered balance sheet.

Sony President Kazuo Hirai has led a sweeping restructuring, including asset liquidisation that saw the $1.0 billion sale of Sony`s Manhattan headquarters.

Last week, Sony said it would shutter its ebook Reader Store in Europe and Australia following a similar pullout in North America.

Sony would sell properties at a prestigious Tokyo site where it had its headquarters for six decades (Loss-hit Sony to sell Tokyo properties in restructuring drive).

But Hirai has repeatedly shrugged off pleas to abandon the ailing television unit, which he insists remains central to Sony`s core business.

Japanese manufacturers have suffered badly in their TV divisions as razor-thin margins and fierce overseas competition weigh on results.

Sony, which revolutionised the way people listen to music with its Walkman portable cassette player has lost its footing since the sure-fire successes of the 1980s, and been overtaken by nimbler foreign competitors like Apple and Samsung.

The electronics that built the brand are now an albatross around its neck, weighing on the profits that other arms of the huge company generate, such as those in music publishing and a movie division that includes a Hollywood studio.

But the movie business also struggled over the past year, while the cost of the PS4 launch put its games division into an operating loss, Sony said.

Operating income for the current fiscal year included a net benefit of ¥11.9 billion from insurance recoveries related to damages and losses incurred from the floods in Thailand, which took place in the fiscal year ended 31 March 2012. Operating results for the previous fiscal year included a net benefit of 40.0 billion yen from the insurance recoveries.

"Sales for Motion Pictures decreased significantly year-on-year due to lower theatrical and home entertainment revenues as the previous fiscal year benefitted from the strong performances of Skyfall, The Amazing Spider-Man and Men in Black 3," Sony said in a statement.

After suffering four years of losses, Sony crept back into the black in the previous fiscal year -- although that was mostly due to asset sales and a weak yen which inflates repatriated profits.

Despite its high-profile struggles, Sony has seen buoyant sales of its Xperia Smartphone offering and record demand for its new PlayStation 4 console.

Last month, the firm said it had sold seven million PS4 consoles worldwide since its launch in late 2013.

The PS4 is up against Microsoft`s Xbox One, and Nintendo`s Wii U for dominance of the digital home entertainment market at a time when consoles are under intense pressure to prove their worth in a world of ubiquitous smart phones and tablets for games and videos.

Sony`s Tokyo-listed shares closed up 1.06 per cent to 1,805 yen, with the earnings announcement made after markets had closed.