Sony Shock Again? Slump May Mean Operating Loss

Exhibit workers look at a display at the Sony booth at the International Consumer Electronics Show...

Exhibit workers look at a display at the Sony booth at the International Consumer Electronics Show (CES) in Las Vegas, Wednesday, Jan. 7, 2009.Sony's shares plunged Tuesday on reports that the iconic Japanese electronics maker is sinking into its first yearly operating loss in 14 years as sales fizzle for digital cameras, flat-panel TVs and other gadgets.

(Jae C. Hong/AP Photo)

Sony is sinking into its first yearly operating loss in 14 years as sales fizzle for digital cameras, flat-panel TVs and other gadgets taking a hammering from the global recession and a soaring yen, analysts said Tuesday.

Sony shares slid 8.9 percent to 2,000 yen ($22.40) on the Tokyo Stock Exchange on Tuesday after Japan's top business daily The Nikkei reported that Sony was expected to rack up a 100 billion yen ($1.1 billion) operating loss this fiscal year ending March, its first since 1995.

The news helped drag down the Japanese stock market, where the Nikkei index tumbled 4.8 percent.

Sony's downturn highlights the pain even Japan's premier brands are suffering amid the global slowdown. Barely a month ago, Toyota Motor Corp., the nation's top automaker, said it was expecting its first annual operating loss in 70 years.

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Behind Sony's dismal forecast are faltering sales of liquid crystal display TVs and other gadgets, especially in the key U.S. and European markets, The Nikkei said, adding that operating losses could balloon to as much as 200 billion yen ($2.2 billion).

Tokyo-based Sony Corp. declined comment.

The U.S. financial meltdown has crushed spending on flat-panel TVs and other gadgets — Sony's mainstays. The credit crunch and consumer worries hit right ahead of the critical year-end holiday shopping season.

The strong yen hasn't helped. The yen, costing about 113 yen per dollar a year ago, has risen to about 90 yen lately. Sony is particularly vulnerable to the strong yen because about 80 percent of its sales are overseas.

The last time — and only time — Sony racked up an operating loss, for the fiscal year ending March 1995, the red ink came from one-time losses in its movie division, marred by box office flops and lax cost controls. At that time, its core electronics unit was still booming.

Kazuharu Miura, analyst with Daiwa Institute of Research, expects Sony to tumble into a 110 billion yen ($1.2 billion) operating loss — which reflects the company's core business operations — for the fiscal year through March 31.