Sony Cuts Profit, Sales Forecast
Friday, October 24, 2008
Consumer electronics giant Sony yesterday slashed its earnings forecast for the 2008 fiscal year, saying profits will be down 38 percent from a prediction the company made this summer and 59 percent from the previous year.
In a statement released from its headquarters in Tokyo, Sony singled out sales of flat-panel televisions, digital cameras and video cameras as likely to be lower than previously expected "due to a deterioration in the market environment brought on by the slowing global economy." The company said it expects earnings of $1.5 billion, down from a July forecast of $2.45 billion.
In the face of deepening worries about the economy, the electronics industry has tried to look optimistic. The Consumer Electronics Association released a study this week suggesting that sales won't be hurt as consumers tighten their belts. The trade group reported that, based on a recent consumer survey, it expects holiday season electronics sales will be up 3.5 percent from last year. That increase would, however, be about half of the sales level in 2007.
Sony competitor LG Electronics reported a dismal quarter earlier this week, with profits down 93 percent at the Seoul-based TV and cellphone manufacturer. Sony's announcement further undermined even modest hopes among analysts yesterday for this year's electronics sales.
"Clearly we're going to be in for a bad holiday," said Stephen Baker, a computer and electronics industry analyst with the research firm NPD. "In a tough economy people have to make some choices, and typically they might not buy that new camera or flat-panel TV. As one of the leaders in this industry, Sony is going to get hit."
It doesn't help, he added, that brisk sales of digital cameras in recent years may have saturated the consumer market.
While Sony has often been regarded as a bellwether for the industry, the company's woes are sharper than those of some competitors. This week, for example, Apple reported brisk sales of Mac computers and iPhones. The company forecast holiday season sales to be flat compared to its performance in the comparable period last year.
Sony had been struggling long before the economy's troubles. Chief executive Howard Stringer took the helm in 2005 and launched a major reorganization in an attempt to restore the company's luster as an electronics pioneer.
Sony's stock price yesterday fell 8.21 percent to $21.46.