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Sony hikes expected annual loss as smartphone business falters

Bloomberg

Sony Corp. CEO Kazuo Hirai is running out of ways to reverse the fortunes of the faltering consumer electronics maker.

The Tokyo-based firm said it would report a larger-than-expected full-year loss due to poor performance in its smartphone business. In a statement issued Wednesday, the firm announced it was taking a writedown of ¥180 billion in the value of its phone unit owing to heavy competition in the market. Shares in Germany dropped by the most in 10 months in reaction to the news.

Hirai has been working to turn the company around by pushing entertainment and game content, consoles and mobile devices as demand for televisions and compact cameras has slumped. But with the Xperia smartphone now faltering, Hirai’s only other options for reviving the company are its movies and PlayStation video game business.

“Sony should have done it earlier,” said Masahiko Ishino, a business analyst at Advanced Research Japan Co. “A lot of people were questioning why it didn’t write down the mobile goodwill earlier as the business hasn’t been doing well since the beginning of the fiscal year.”

Sony increased its full-year net loss forecast to ¥230 billion from ¥50 billion and suspended its shareholder dividend for the first time since its 1958 listing after writing down the value of its smartphone business. The firm has lost money in five of the previous six years.

German-traded Sony shares fell 8.9 percent, the most since Oct. 31. In Tokyo, the company’s shares dropped 1.8 percent, denting a 16 percent gain this year.

When Hirai took over as CEO in 2012, he said Sony’s revival would be driven by games, imaging products and mobile devices. Since then, the company has slashed jobs and undertaken a massive restructuring program to turn its TV manufacturing unit into a separate business. Hirai has also trimmed the TV product lineup to focus on popular, large-screen models.

Sony trails Samsung Electronics Co. and Apple Inc. by a wide margin in smartphone sales, ranking ninth in the world in the second quarter with shipments of about 9.4 million units, according to data compiled by Bloomberg. Samsung unveiled its Galaxy Note 4 device and Apple is scheduled to release its new iPhone 6 models on Sept. 19.

Sony has about 3.1 percent of the global market for smartphone shipments, and earlier this year revised its annual sales forecast down to 43 million units from 50 million. The mobile products unit posted a loss of ¥2.7 billion in the first quarter, compared with a profit of ¥12.6 billion a year earlier.

“The size of it is larger than expected,” Damian Thong, a Tokyo-based analyst at Macquarie Group Ltd., said of the revision. “We were expecting a ¥60 billion impairment and restructuring charge in the handset business.”