Sony’s fiscal year hurt by ‘smack in the eye’

Bloomberg

For Chief Executive Officer Howard Stringer, this was supposed to be Sony Corp.’s year.

The company that invented the Walkman was preparing to launch the new PlayStation Portable player and its first tablet computers in time for Christmas, the money-losing games division finally turned profitable and Stringer had picked Kazuo Hirai as the front-runner to eventually succeed him.

That was less than three months ago.

Then Japan’s strongest earthquake on record hit and hackers invaded the company’s Internet entertainment services in the second-largest online data breach in U.S. history.

The result: Sony said Monday it posted its widest annual net loss in 16 years and forecast the earthquake and the attack will erode ¥150 billion from operating profit this fiscal year to keep earnings from meeting analysts’ estimates.

“Sony said it was going to be its year, but it looks like it then got a smack in the eye,” said Shiro Mikoshiba, an analyst at Nomura Holdings Inc. “In terms of earnings, we’re probably going to have to wait for six months or so before we can hope to see impressive results.”

Disclosing the estimated financial toll of the earthquake and cyberattacks removes a “major negative catalyst,” said Jay Defibaugh, an analyst at MF Global FXA Securities Ltd.

Operating income in the 12 months to March 2012 will be similar to the ¥200 billion last fiscal year, Sony said in a preliminary earnings statement Monday. The forecast missed the ¥254.7 billion average of nine analyst estimates.

Sony estimated the March 11 quake will erode operating profit by ¥150 billion this fiscal year as the firm struggles to improve earnings even after restarting the plants that were disrupted by the disaster. Last month’s unauthorized intrusion into the PlayStation network may cost the company ¥14 billion, it said.

Chief Financial Officer Masaru Kato said Monday the lowered profit outlook forced Sony to write down the value of the deferred tax assets by ¥360 billion last quarter, resulting in a net loss of ¥260 billion. It was also the first time Sony posted three consecutive full-year losses since its listing in 1958.

“This may be a conservative forecast, but the operating profit level still looks much lower than expected even if you take the earthquake impact into account,” said Kazuharu Miura, a senior analyst at SMBC Nikko Securities Inc. “Sony continues to face a harsh business environment.”

Still, Sony forecast its net loss will turn positive this fiscal year and revenue will likely increase after a 0.5 percent drop.

Growth was on Stringer’s mind March 10 when he spoke to reporters about the promotion of Hirai, his games chief, as the front-runner to carry out the vision to integrate Sony’s TVs and computers with content from its entertainment businesses.

“It’s a very exciting year,” Stringer said then. “We have a tablet coming out, we have the PlayStation network for the video and music services growing in strength.”

The following day, the earthquake and tsunami hit, crippling scores of factories, including some of Sony’s. Nine of the company’s electronics factories in northeastern Japan that had been disrupted by the disaster had resumed operations as of April 28, according to the company. Other plants had to curtail production because of material and component shortages.

About a month later, the maker of PlayStation game consoles was attacked by hackers who may have gained information on more than 100 million user accounts of Sony’s online services for games, music and films.

The PlayStation Network and Qriocity entertainment services went back online in the U.S. and other regions excluding Asia on May 15, more than three weeks after it suspended services. The company plans to fully resume the services by the end of this month.