Struggling Sony warns of $2.14 billion annual loss—over four times forecast

Sony expects its annual loss to swell to 230 billion yen (US$2.14 billion) and has cancelled dividends for the first time in more than half a century after writing down the value of its troubled smartphone business. Citing intense competition, especially from Chinese rivals, Sony said it anticipates a net loss of 230 billion yen for the fiscal year that ends March 31 2015. Its previous forecast was for a 50 billion yen (US$407 million) net loss. For the first time since going public in 1958, the Japanese electronics and entertainment conglomerate cancelled dividend payments for the half and full year.

For more than 50 years we always paid a dividend. The entire management takes this very seriously.

Sony chief Kazuo Hirai

Sony has been trying to reshape its business after years of red ink and has repeatedly promised turnarounds without delivering. It said the bigger loss for the current fiscal year stems from a lower valuation of its mobile phone business due to weaker than expected sales. The company is recording an “impairment charge” of 180 billion yen (US$1.6 billion) in the July-September quarter. The charge is purely an adjustment to the company’s balance sheet, involving no cash, but it reflects that the mobile business is far less valuable and will generate lower profits than previously thought. The smartphone business has proven particularly tough for Sony.

The Chinese smartphone manufacturers have made great strides and are expanding outside their own market, and this has caused a shift in the pricing. Meanwhile, Apple and other manufacturers are launching strong, innovative products. The changes are very rapid and dramatic.

Kazuo Hirai

Business Sony forecast