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Sony Cuts Profit Forecast By 70%, Faces $300 Mill Extra Costs

| 1 May 2014 12:19
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Selling the PC division has hurt Sony's bottom line much more than Sony anticipated.

Sony's profit forecast has taken a massive hit thanks to $300 million in extra costs associated with the sale of its PC division. The profit forecast for the year ending March 31st has been revised downward by almost 70% as a result. Weak demand, particularly in Europe, for physical media has also hit Sony hard. Sony always knew the day would come when its customers stopped caring about DVDs and CDs, but it hadn't expected it to come quite as quickly as this. The contraction in demand cost Sony ¥25 billion (c. $242 million).

Sony's now looking at a net loss for the year of ¥130 billion ($1.27 billion), which is about ¥20 billion more than the loss it forecast back in February. The big problem with its PC market is that as soon as Sony announced it was selling off the division, people stopped buying. Again, this was something Sony expected, but it didn't expect the hit to be so severe.

"Consequently, Sony expects to record write-downs for excess components in inventory and accrual of expenses to compensate suppliers for unused components ordered for Sony's spring PC lineup," said the company in a statement.

"In addition, certain restructuring charges are expected to be recorded ahead of schedule. As a result of these factors, an additional total amount of approximately ¥30 billion in expenses is anticipated to be recorded in the fiscal year ended March 31, 2014."

These losses are counterbalanced by the cost-saving measures, redundancies and sell-offs Sony has been implementing over the last year, but the impact on its bottom line has still cut drastically into its operating income, which has been slashed from ¥80 billion to ¥26 billion.

Source: Guardian

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