Last updated: July 28, 2011 10:52 am

Sony cuts profit forecast by 25%

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Sony signalled on Thursday that it would withdraw further from in-house production of television sets after a slowdown in global TV sales prompted it to cut its full-year profit forecast by a quarter.

Masaru Kato, chief financial officer, said the Japanese technology group would extend a restructuring drive that has seen it close some TV factories and sell others to lower-cost Taiwanese rivals.

“We must take additional measures on top of those we’ve taken so far,” he said after Sony cut its TV sales forecast for the fiscal year to next March by 5m units, to 22m. “We need a business structure that allows us to be profitable at a lower sales level.”

Sony blamed worsening economic conditions in the US and Europe for the weaker-than-expected demand, which has also hurt earnings at Samsung of South Korea, the TV industry’s biggest-volume manufacturer.

Televisions have long been one of Sony’s best-known products, but in the flats-creen era the company has lost ground to Samsung and other lower-cost Asian producers, and its TV business has been in the red since the 2003-04 financial year.

Sir Howard Stringer, chief executive, has responded by closing four of Sony’s eight television factories and outsourcing more production abroad, but much of the resulting cost-saving has been offset by plunging prices.

The problems in the television business are one of the main reasons the company has suffered net losses in each of the past three years.

Sony on Thursday cut its full-year net profit forecast to Y60bn ($772m) from an already relatively modest Y80bn.

It reported a Y15.5bn loss for the April-June first quarter, owing in large part to the impact of Japan’s March earthquake and tsunami. The disaster, which killed more than 20,000 people, disrupted industries including electronics and carmaking, although most companies, including Sony, say the worst financial effects are behind them.

Still, earnings for the April-to-June period are expected to be down sharply across corporate Japan, a trend illustrated by results from other technology groups on Thursday. Panasonic reported a Y30bn quarterly net loss, compared with a Y43.7bn profit in the same period last year, while Toshiba and Sharp reported heavy earnings declines.

Sony’s problems have been compounded by hacker attacks on its PlayStation Network video game platform and other internet-based services, which have exposed personal information belonging to more than 100m users to theft. Sony said in May the attacks would probably cost it Y14bn this year, though Mr Kato said on Thursday that the impact may end up being “slightly smaller”.

Police in London arrested a man on Wednesday in connection with the hacking attacks.

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