Sony Shock Again? Slump May Mean Operating Loss

Past troubles in Sony's electronics business had been offset by gains in other divisions, such as video games and also its once-thriving insurance and banking divisions in Japan. But now, it is seeing slumps across the board. Video games have struggled to boost profits, and the financial branches have been hit hard by the global credit crunch.

Sony Executive Deputy President and CEO Katsumi Ihara, center, Executive Vice President Nobu Kurita,...

Sony Executive Deputy President and CEO Katsumi Ihara, center, Executive Vice President Nobu Kurita, left, and General Manager Takao Yoshikawa pose for the media at a press briefing of its new Bravia TV series in Tokyo in this photo taken on Thursday, Aug. 28, 2008. Sony will post a 100 billion yen ($1.1 billion) operating loss this fiscal year through March, its first since 1995, media reports said Tuesday, Jan. 13, 2009. (AP Photo/Shizuo Kambayashi)

(AP)

"In that sense, Sony is in an extremely tough situation this time," Miura told The Associated Press.

Drastic job cuts and reduction in research spending would be needed to wrest Sony out of its latest troubles, he said.

Other analysts echoed similar sentiments, noting the expected red ink from Sony's digital cameras and other products because of falls in both sales and prices.

Sony has already taken some dramatic steps. Last month, the company said it would implement major cost-cutting to ride out the slump, including slashing 8,000 jobs, or about 4 percent of its work force, lowering spending and shutting plants.

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In its heyday of the 1980s and 1990s, Sony was seen as an innovator with its Walkman portable player and PlayStation video game machine. But Sony has seen its brand power gradually lose its luster in the face of rivals not only from Asia but also from the West, such as the iPod from Apple Inc.

Until the U.S. financial crisis, Sony had been on a recovery track following a cost-cutting overhaul under Chief Executive Howard Stringer, a Welsh-born American, who became the first non-Japanese to head Sony in 2005.

That restructuring phase included pulling the plug on Sony's robotics division, selling off assets, ending the Qualia line of fancy gadgets and withdrawing from plasma displays.

Stringer's appointment came after a series of faltering profit reports that culminated in the "Sony shock" of 2003, when the company's shares plunged.

Sony President Ryoji Chubachi has expressed dismay at the U.S. slowdown, but he also expressed hopes that the global economy would start to recover later this year.