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Sony’s Financial Crunch: 18% Increment in Losses, Recovery Gets Tougher

PlayStation 4 has outsold Xbox One by an impressive margin, there’s no denying in that. Sadly though, that is just one fraction of the picture. In reality, Sony Corp. is struggling at the hands of slumping demand on other fronts.

The Tokyo based company has recently reported a loss of 130 billion Yen i.e. $1.3 billion for the financial year ended March 2014. This is 20 billion yen i.e. 18% higher than what was forecasted in February. The February forecast was in turn a revision from the originally forecasted profit of 30 billion Yen!

The main cause of this is the reduced demand of their commodity focused businesses like TV, camera, smartphones. It looks like letting go off Vaio was not the only thing that Sony needed to do.

Mitsushige Akino the chief fund manager at Ichiyoshi Investment Management Co. was pretty blunt about what Japan’s iconic technology company will need to do in order to put a stop to ever decreasing earnings:

“There is no stop to their downward revision of earnings. They can’t get into a growth stage, and it’s difficult to recover. Unless they announce sales of the TV business, the market won’t think Sony is serious.”

That is not all, Makoto Kikuchi, Tokyo-based chief executive officer for Myojo Asset Management Co. also believes that they are still carrying underperforming businesses that are dragging it down:

“Without the disposal of under-performing businesses, Sony will repeat the same mistakes. The company should leave from commodity-type businesses. It has already left PC. The remaining is TV.”

That is two well-known analysts urging the company to restructure their businesses, and criticizing the TV business. Moreover, it is evident that the downfall in the tech giant’s earnings is going to have negative impact on their profit making units too.

Talking of profitable units, it is a fact that PlayStation 4 has managed to pull off better sales than rival Xbox One. Yet, the PlayStation Division alone can’t sustain the loses of their division and if the pressure mounts, we could see things crumbling down.

What do you think should be done to tackle the financial crunch of Sony?

Source: Bloomberg