Sony Corp reported a second straight quarterly loss hurt by a firmer yen, sluggish sales and restructuring costs, and it projected another year of red ink during which it will close eight factories worldwide.
Consumer electronics makers around the world were battered last year as the global downturn dampened demand for TVs and mobile phones. Japanese companies such as Sony, Panasonic Corp and Sharp Corp suffered an additional blow as the yen's strength made their products less price competitive overseas.
Sony is in the process of cutting 16,000 jobs and reducing its network of 57 manufacturing sites by 10 percent to survive the financial crisis. It said on Thursday it would close an additional five plants this year, including a flat-screen TV factory in Mexico.
Expecting losses at its electronics operations to widen and its games division to stay unprofitable, Sony forecast an operating loss of 110 billion yen ($1.15 billion) for the financial year to March 2010.
That would be an improvement from the 227.78 billion yen loss it booked a year earlier and less than a consensus loss forecast of 132.9 billion yen in a poll of 20 analysts by Thomson Reuters.
Analysts expect the worldwide digital camera and mobile phone market to contract this year as the recession dampens replacement demand, capping Sony's earnings recovery despite aggressive cost cuts.
Cost-cutting and wringing profits out of the TV division are important, but that will only take you so far, said Nobuo Kurahashi, analyst at Mizuho Investors Securities.
What I really want to know is how Sony is going to compete after the economy recovers.
Kurahashi said Sony's focus on portable devices with network capability wasn't yielding results, while rivals such as Sanyo Electric Co appear to be securing a brighter future by latching on to solar panels and organic displays.
'NO. 1' PRODUCT WANTED
In January-March, Sony's operating loss came in at 294.31 billion yen, a huge reversal from its profit of 6.18 billion yen a year ago. Sales fell 22 percent to 1.524 trillion yen.
Sony saw sales at its cell phone joint venture with Ericsson tumble, while costs to shed jobs and close plants also weighed on the company, which vies with Panasonic for the title of the world's largest consumer electronics maker.
Sony, which competes with Samsung Electronics Co in LCD TVs and Canon Inc in digital cameras, said it aims to sell 15 million LCD TVs this financial year, down slightly from 15.2 million last year.
It aims to boost sales of its PlayStation 3 game console by nearly 30 percent to 13 million units.
Their outlook gave me the impression that their business is heading for a gradual recovery. But it would all depend on whether they will be able to start making popular products because right now they have no 'No. 1' product, said Fujio Ando, senior managing director at Chibagin Asset Management.
I see Sony's branding power weakening.
Shares in Sony closed down 6.8 percent at 2,400 yen ahead of the earnings announcement, underperforming the Tokyo stock market's electrical machinery index, which fell 4.1 percent.
The stock has gained 34 percent this year through Wednesday, while the subindex was up 22 percent.
(Additional reporting by Stanley White and Mariko Katsumura; Editing by Anshuman Daga)