Troubled Sony cuts earnings forecast

20 Oct 2006

[Associated Press via NewsEdge] Technology giant Sony slashed its profit forecasts because of costs from a massive global recall of laptop batteries and price cuts in Japan for the next-generation PlayStation 3 video game console.

Sony now expects a group net profit of 80 billion yen ($673 million) for the fiscal year through March 2007, down 38% from the 130 billion yen ($1.1 billion) it had projected in July.

The revision reveals the deep troubles at the Japanese manufacturer as it tackles a turnaround under its first foreign chief executive, Welsh-born American Howard Stringer.

Sony may need to further lower its projections as losses related to the battery recall may grow, said Tatsuya Mizuno, analyst a Fitch Ratings in Tokyo. Toshiba has said it may demand damage compensation from Sony, and others may follow suit.

'The battery problem is not a simple one-time problem for Sony because it hurts the company's reliability as a supplier in its core electronics sector,' Mizuno said.

Sony left unchanged its fiscal year sales outlook at 8.23 trillion yen ($69 billion), but lowered its operating profit 62% to 50 billion yen ($420 million) from the earlier forecast for 130 billion yen ($1.1 billion).

The Japanese electronics company said in a statement that it would rack up an extra cost of 51 billion yen ($429 million) in the July-September period for recalls of lithium-ion batteries for laptops announced by practically every major laptop maker in the world.

Sony had initially said the battery recalls would cost the company between 20 billion yen ($168 million) and 30 billion yen ($252 million).

Sony later announced that the recall affected 9.6 million batteries worldwide. Sony spokesman Takashi Uehara said the 51 billion yen cost associated with the recall did not include 'provisions for possible lawsuits' indicating costs might continue to grow.

© 2006 The Associated Press

© 2006 Dialog, a Thomson business. All rights reserved

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