Introducing the Sony DismayStation
If we were any more successful, we’d be bankrupt.”
– Sony CEO Howard Stringer on the company’s LCD business, May 28, 2008
What a dark day this is for Sony. Its hand forced by a profound deterioration in the current business environment, the company today slashed its forecast for the current financial year and said it will soon post an annual loss for the first time in 14 years. And that loss will be far worse than even the most pessimistic forecasts–$1.65 billion.
A bitter turn of fortune for Sony (SNE), which as recently as October had claimed it would make a profit this year. Clearly, the deepening worldwide recession has been particularly cruel to the company. And though Sony is attempting a perilously overdue restructuring that will trim 16,000 jobs and six factories from its books, analysts are beginning to wonder if the notoriously fragmented company might need to take even more drastic steps. “Its business model and operational issues account for 80-90 percent of Sony’s poor earnings,” Nomura Securities senior analyst Eiichi Katayama told Reuters. “Domestic production costs are a concern but this move is not something that would bring it back to the black or cut losses in half. Sony has to consider ways to lower fixed costs not only for its TV business but for the whole company. It will have to start cutting development costs in addition to production costs.”