Sony forecasts massive $2.9bn loss

Sony's PlayStation division set to post massive losses for last financial year
Sony's PlayStation division set to post massive losses for last financial year

Sony expects to make a huge operating income loss of $2.9 billion for for the financial year ending March 2009. It's the first annual loss for the company since 1995 and considerably greater than previously forecasted.

Sony Computer Entertainment – the PlayStation division of the company – is high on the list of struggling departments. The division's losses are expected to increase by around $337 million in the financial year.

Sony is claiming lower-than-expected sales and appreciating value of the yen, which makes exporting expensive, as the reasons for the increased loss.

Bad news all round

It's bad news in the other divisions of the company too, with Sony's electronics division expecting losses in the region of JPY 340 billion, Sony Pictures expecting a loss of around JPY 13 billion, Sony's financial services expecting losses of around JPY 65 billion and all other business a loss of JPY 11 billion.

Eiichi Katayama, an analyst at Nomura Securities, said: "Its business model and operational issues account for 80 to 90 per cent of Sony's poor earnings. Domestic production costs are a concern, but this move is not something that would bring it back to the black or cut losses in half. It will have to start cutting development costs in addition to production costs."

It seems job cuts are inevitable, with Sony expected to make an announcement in the very near future. It is expected that around 2000 employees will be let go when Sony closes TV factories in Japan. It will be the first of a number of expected cost-cutting measures.

Adam Hartley