Sony, Japan's ailing electronics company, has said it is heading for a bigger-than-expected 220bn yen ($2.9bn) annual loss, presenting a daunting task for incoming CEO Kazuo Hirai, who vowed to move quickly to turn things around.
Hammered by weak TV sales, a strong yen and production disruptions from flooding in Thailand, Sony Corp on Thursday reported a net loss of 159bn yen ($2.1bn) for the October-December quarter and more than doubled its projected loss for the full fiscal year.
"There is no question 2011 was one of the most trying periods in Sony history"
- Howard Stringer,
In November, Sony had predicted an annual loss of 90bn yen ($1.2bn).
"Sony must steer a new course,'' Hirai said, a day after he was named to the CEO post.
Hirai, who at 51 will become Sony's youngest chief executive when he takes over in April from Welsh-born Howard Stringer, led the company's gaming division earlier in his career.
"We will need to make many painful decisions and execute them, but I believe these are unavoidable for Sony's future.''
Sony, whose businesses span from cameras and mobile phones to PlayStation game consoles and films such as The Smurfs, has for years been struggling to regain the innovative flair that made it a dominant force in the global electronics industry in the 1980s and early 1990s.
Stringer, who is expected to step down on April 1, will retain his post as chairman of Sony until June, after which he will become chairman of the board, a position less involved in daily corporate operations.
"Now more than ever it's time to bring about generational change,'' Stringer said.
"Change is good, it is healthy, and in this hyperconnected world, it is essential.
"Kaz has the right combination of personal qualities, tough-mindedness and leadership skills to lead Sony'."
Stringer, who led Sony since 2005, said he began thinking about his successor in 2009, when he named Hirai and a few other young executives to a new management team.
"Why now? Because he's ready," Stringer said. "We need him in charge as we redouble our efforts of recovery.''
A priority for Hirai, currently executive deputy president, will be turning around Sony's money-losing TV business, damaged by competition from South Korea's Samsung Electronics Inc and others.
Hirai also must guide Sony as it faces increasingly intense competition in the gaming sector from Apple Inc's iPod and iPhone and Nintendo Inc's DS handheld.
Sony is hopeful about its new PlayStation Vita, which went on sale in Japan in December and is to be released in the US and Europe later this month.
Hirai outlined some of his strategic goals in spurring a recovery, which included a commitment to reviving the TV business, strengthening the company's cellphone business, spurring innovation and pushing into the field of medical technology.
Hirai defended his commitment to the TV business, which is projected to lose money for the eighth straight year.
"At home, the TV plays a central role,'' he said. "Various products can be enjoyed on TV, so it is strategically important, and we cannot withdraw from this business.''
Natural disasters at home, the March 11 earthquake and tsunami, which disrupted production, and flooding in Thailand, where two of Sony's factories had to be shut down, also took a toll on the company's business over the past year.
"There is no question 2011 was one of the most trying periods in Sony history,'' Stringer said.
Sony's forecast of a larger annual loss also stemmed from two temporary factors linked to Sony's withdrawal from two joint ventures.
One was Sony's sale of its stake in S-LCD, a liquid crystal display joint venture with Samsung, which resulted in an impairment loss of 63.4bn yen ($813m).
Another was Sony's decision to take full ownership of cellphone maker Sony Ericsson, which led to a 33bn yen ($433m) charge on valuation allowance on deferred tax assets.
The yen's strength against the dollar and euro, which erodes income when repatriated back to Japan, has also hurt Sony.
Quarterly sales fell 17.4 per cent to 1.82 trillion yen ($22bn), the company said. Stringer acknowledged that Sony, "like much of Japan, is in real difficulty.''
But he suggested it would be unwise to bet against the company, as it had weathered the global financial crisis of 2008 and other setbacks.
"We have bounced back twice, and don't bet against us bouncing back again,'' he said. "It would be very nice if there were not earthquakes, no floods, no hackers, no anything, but on our own skills we can get the company back."
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