Sony TV woes spell more red ink ahead

by Mie Sakamoto

Kyodo

After three straight years in the red, Sony Corp. faces another rough year ahead as the electronics giant struggles to make its mainstay television business profitable amid a host of challenges.

Like its Japanese peers, Sony’s business performance was affected by the March 11 earthquake and tsunami, leading the company to post a massive group net loss of ¥259.59 billion for the fiscal year that ended March 31.

But the natural disaster, which is likely to have a negative impact of some ¥440 billion in sales and about ¥150 billion on its operating balance in the year begun in April, is not the only hurdle Sony needs to overcome.

The recent data breach that affected more than 100 million accounts, mainly of its PlayStation gaming network, could deal a blow to the company’s goal of boosting its network business, through which Sony aims to integrate its hardware and software, analysts said.

“The incident certainly did not make a good impression on the public and consumers, as it came at a time when the company planned to proceed with a strategy to spread its network business to personal computers, tablets and smartphones, not only PlayStation game consoles,” said Koki Shiraishi, an analyst at Daiwa Securities Capital Markets Co.

Sony officially announced the massive data breach last month, a day after saying it would launch tablet computers around the world this fall with the aim of taking the second-largest share in the global market after Apple Inc., maker of the popular iPad.

The trouble appears far from resolved, as Sony encountered additional attacks on its online music service in Greece and mobile phone unit in Canada a month afterward.

Though the data breach may have only a limited impact on Sony’s money-making gaming business, it could create uncertainty surrounding the prospects of its network business as a whole, Shiraishi said.

The company also continues to face the difficult task of turning a profit in its TV business, which remained in the red for the seventh straight year.

The business incurred a loss of ¥75 billion in fiscal 2010, deteriorating by ¥2 billion from the previous year, as it was forced to engage in price competition with rivals like South Korea’s Samsung Electronics Co. and LG Electronics Inc.

“We were aiming to make the business profitable before the disaster,” Sony Chief Financial Officer Masaru Kato told a news conference Thursday as he admitted the company now expects the TV business to remain in the red this fiscal year.

“The business environment means it is not easy for us to say whether the business can be profitable,” Kato said, citing such factors as harsh price competition and shortages in some parts after the disaster.

In addition, the strategy to sell value-added TVs has not proved to be successful so far, as 3-D TVs and Internet TVs have failed to attract customers, Daiwa’s Shiraishi said.

“In the global TV market, price has become the only focus, triggering the collapse of prices,” he said, adding that no one is making a profit in the business at present.

But the company still has an advantage over rivals in its bid to make its TVs a “network gateway” by connecting them to the Internet, Shiraishi said.