March 4, 2021

Sony Swings to Big Loss After Natural Disasters

TOKYO — The March 11 earthquake and tsunami probably pushed Sony to a $3.2 billion loss in the just-ended fiscal year, the electronics and entertainment giant warned Monday, the latest Japanese manufacturer to report a huge economic hit from the disaster.

The annual loss would be Sony’s biggest in 16 years, a major setback to chief executive Howard Stringer’s drive to turn around the once-legendary maker of PlayStation video game consoles, Bravia flat-panel TVs and Vaio laptops.

Sony suffered damage at nine plants in northeastern Japan in the quake and tsunami, which also disrupted supply chains and put a damper on domestic consumption. A series of hacker attacks on Sony’s online services, which forced the company to shut down its PlayStation Network, has also clouded the outlook for the Japanese manufacturer.

After assessing the damage, Sony said Monday in a preliminary earnings statement that it expected to report a net loss of 260 billion yen ($3.2 billion) for the year ended March 31, 2011, from a previous forecast for a profit of 70 billion yen. The company reports full earnings on Thursday.

Much of the net loss came from a 360 billion yen provision for deferred tax assets the company is making in light of the uncertain outlook for future earnings. It left its forecast for annual operating profit unchanged at 200 billion yen ($2.4 billion).

For the current fiscal year ending March 2012, Sony said it expected operating profit to stay around 200 billion yen. This took into account the lingering effects of the quake, which will likely shave 150 billion yen off operating profit, Sony said.

Known costs related to the hacker attacks have so far reached about 14 billion yen, Sony estimated. Sony has said it hopes to get all affected networks up and running by the end of May.

Sales for the current year would likely come to about 7.18 trillion yen, down slightly from 7.20 trillion yen, it said. Sony said it expected net profit to turn positive this year, though it did not give an estimate.

Sony’s earthquake woes have come at a time the company is struggling to reinvent itself after being usurped in TVs and digital music players. Even its stronghold in the video gaming business is succumbing to cheaper and nimbler rivals. Sony has now lost money three years in a row.

Just as damaging have been the hacker attacks that forced Sony to shut down its PlayStation Network for almost a month. Sony has acknowledged that personal information from over 100 million accounts were compromised in the attacks.

In an interview last month, Mr. Stringer defended Sony’s response to the attacks, which some critics have said was too slow.

Sony is the latest Japanese manufacturer to report substantially lower earnings following the magnitude 9 earthquake in March, which devastated much of Japan’s northeastern coast.

Earlier this month, Toyota, whose operations have been severely disrupted since the disaster, said that profit fell 77 percent for the quarter ended March 31. Toyota, which is likely to lose its crown as the world’s biggest automaker this year, said it could not forecast earnings or production for the year ahead because of uncertainty about its ability to resume normal output levels.

Article source:

G.E. Posts Earnings That Exceed Forecasts and Raises Dividend

The results easily topped the forecasts of Wall Street analysts, but its shares ended 2.2 percent lower on Thursday, reflecting concern about a decline in industrial margins, some analysts said.

G.E. said net income was $3.4 billion in the first three months of 2011, or 31 cents a share, compared with $1.9 billion and 17 cents in the quarter a year ago. Excluding one-time items, earnings were 33 cents a share, exceeding the average estimate of 28 cents from analysts surveyed by Thomson Reuters.

Earnings from continuing operations were $3.5 billion compared with $2.4 billion in the period a year ago.

The chief executive, Jeffrey R. Immelt, said in a statement that G.E. had emerged from the recession a stronger company.

“G.E. health care, transportation and aviation delivered strong results,” Mr. Immelt said. “Strategic investments in high-growth segments have strengthened the company’s energy portfolio and position that business to return to growth in the second half of this year.”

Over all, revenue rose 6 percent, to $38.45 billion in the first quarter, exceeding analysts forecasts of $34.64 billion. Revenue in the same quarter a year ago was $36.2 billion.

The results and outlook reflected the company’s efforts to diversify and make acquisitions, while trying to build its businesses in crucial sectors like energy. On Thursday, the company described itself as “cautiously optimistic” about the gas turbine business, with strong orders from the Middle East and plans to help Japan meet its energy demands after its nuclear plant was damaged in the March 11 earthquake and tsunami.

“Our teams are working diligently to support our customers in Japan,” Mr. Immelt said in a conference call.

Early this month G.E. announced plans to build the nation’s largest photovoltaic panel factory, with the goal of becoming a major player in the market.

G.E. also completed the sale of 51 percent of NBC Universal to the Comcast cable network in the quarter, which resulted in an after-tax gain of 4 cents a share. In the deal, Comcast paid General Electric nearly $6.2 billion in cash and contributed its pay television channels like E Entertainment Television and the Golf Channel, worth $7.25 billion, to NBC Universal.

General Electric said when announcing its last results in January that it had a backlog of orders that positioned it for growth in 2011, with the transportation, health care and finance units expected to lead in earnings. On Thursday, Mr. Immelt said the backlog, a gauge of future results, was $177 billion.

Richard Tortoriello, an equity analyst with Standard Poor’s, said the orders numbers suggested growth in the global economy, particularly in emerging markets like Brazil, China and India.

“G.E. is a bellwether in the sense that they are one of the largest industrial companies out there, but they have a larger proportion of what you might call long cycle business than others,” Mr. Tortoriello said.

“We are not taking off like a rocket ship,” he said, “especially with regard to the U.S. and Europe, but the growth is there.”

The company, which is based in Fairfield, Conn., also raised its quarterly dividend by a penny, to 15 cents, beginning in the third quarter, the report said. It increased its dividend twice in 2010. In July, the dividend was raised to 12 cents a share from 10 cents, and in December it was increased further, to 14 cents. The company paid 31 cents a share until February 2009, when, for the first time since the Great Depression, the board cut the dividend to conserve cash.

Timothy A. Hoyle, a vice president at Haverford Investments, said the potential for a dividend increase was apparent in 2010 as the company’s capital unit returned to normal and as it finished a deal involving the sale of NBC Universal. “We saw plenty of excess capital generation,” Mr. Hoyle said. “That is happening.”

But he also noted that G.E. had said it had a decline to 14.3 percent in industrial operating margins because of weakness in the energy sector, partly as a result of lower wind turbine pricing.

The company’s shares fell 45 cents, or 2.21 percent, to close at $19.95 on Thursday.

While G.E. is a household name as a manufacturer of common household products like lights bulbs and electric fans, it also has a diverse portfolio of finance and business units.

Its lending division, GE Capital, the nation’s largest nonbank financial institution, has provided more than half of G.E.’s profit in some recent years. But the unit was struggling amid the fallout from the collapse of the real estate market, and Mr. Immelt has tried to refocus G.E. more toward the industrial sector.

The company said GE Capital reported net income of $1.8 billion in the first quarter, up from $583 million in the period a year ago.

“With losses having peaked, we are originating new business at attractive margins and our funding costs continue to be favorable,” Mr. Immelt said of GE Capital.

Article source: