Sony CFO Masaru Kato at a news conference in Tokyo

Sony faces $3.2bn net annual loss

Sony is facing its third annual loss following the Japan earthquake and high-profile network security breaches.

The Japanese electronics maker expects to post a net loss of 260 billion yen ($3.2 billion) for the year ending in March, due to a non-cash charge of around 360 billion yen related to Japanese tax credits. 

It will be Sony's second-largest ever loss, underscoring the decline of a company which has been battling to recover from the Japan disaster and a recent series of security breaches on its networks that affected more than 100 million user accounts.

"Sony has been overtaken by Apple and other companies," said Yuuki Sakurai, CEO and president of Fukoku Capital Management in Tokyo.

"The management is not able to show shareholders the future of the company."

Sony, the maker of PlayStation video games, Vaio computers and Bravia TVs, has found itself outmanoeuvred by Apple in portable music, Samsung in flat-screen TVs and now is battling with Nintendo and Microsoft in video games.

The firm, which previously forecast a net profit of 70 billion yen for 2010/11, surprised markets this week by declaring the need to update investors with revised estimates ahead of its official earnings report.

Stock exchange rules in Tokyo require companies to notify investors if estimates for the business year are likely to be more than 30 per cent higher or lower than their most recent forecast.

Sony, once a symbol of Japan's electronic and manufacturing excellence, said it expected sales to rise this year and forecast a return to net profit, but did not elaborate.

Its earlier forecast was issued before the Japan earthquake, which has tipped the country's economy into recession and disrupted supply chains globally in a number of industries.

Although Sony revised its bottom line, it maintained that annual operating profit would still come in at 200 billion yen for 2010/11, which is broadly in line with consensus forecasts while next year's estimated operating profit will also be around 200 billion yen.

Some investors see the revisions as a way for Sony to put the slew of bad news behind it and start with a clean slate next year.

"Sony sharply revised down its net forecast to a big loss to show that the impact of the earthquake has been largely factored-in during the previous financial year, while the impact would be limited for the current year," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"Probably the company is expecting the global economy to recover during the second half of the year. Maybe this perception could be a bit optimistic, but we still have to wait and see."

Sony estimated the impact of the quake in the current year at 150 billion yen at the operating level.

Many of Sony's rivals, including Panasonic, have yet to issue forecasts for the current year due to uncertainty following the disaster.

Sony last month also disclosed that it had been a victim of one of the biggest cyber-attacks in history.

It shut down its PlayStation Network across the globe in mid-April and has slowly started to restore access, starting in the United States.

The company is still working with Japanese government authorities to restore access in that country.

Sony said "known costs" for the hacking attacks were estimated at 14 billion yen. Sony is targeting the end of May for fully restoring the affected networks.

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