Sony posts loss of $3.2 Billion

#1
Reuters: Sony estimates FY 2010/11 net loss, revises from profit

Sony on Monday changed its earnings estimate for the year to March 2011 to a net loss of 260 billion yen ($3.2 billion) from a profit of 70 billion, in the company's first indication of the financial impact of the devastating March earthquake and tsunami.

The company maintained its estimate of an operating profit of 200 billion yen, which compares with analysts' consensus of 197 billion yen, according to a SmartEstimate by ThomsonReuters I/B/E/S. SmartEstimates place additional weight on recent forecasts by top-rated analysts.
Bloomberg: Sony Posts Full-Year Loss $3.2 Billion, Confounding Estimates for Profit

Sony Corp. (6758), Japan’s largest exporter of consumer electronics, unexpectedly reported a third straight annual loss, citing a charge for deferred tax assets.

The net loss was 260 billion yen ($3.2 billion) in the year ended March 31, including a 360 billion yen charge for deferred tax assets, the Tokyo-based company said in a preliminary earnings statement today. That compares with the 76 billion yen profit average of 10 analyst estimates compiled by Bloomberg in the past 28 days and Sony’s previous forecast for annual profit of 70 billion yen.

The maker of Bravia televisions is struggling to improve earnings even after restarting plants that were disrupted by Japan’s 9-magnitude temblor and ensuing power shortages. The company is trying to fully resume its PlayStation Network and Qriocity online services after an attack by hackers compromised personal information from more than 100 million user accounts.

Operating income, or sales minus the cost of goods sold and administrative expenses, increased to about 200 billion yen while revenue declined 0.5 percent to 7.18 trillion yen, Sony said. That compares with the 206 billion yen and 7.2 trillion yen averages of analyst estimates compiled by Bloomberg.

Sony fell 0.5 percent to close at 2,211 yen in Tokyo trading today before the announcement. The stock has dropped 24 percent this year, more than triple the 7.5 percent decline by Japan’s benchmark Nikkei 225 Stock Average.
Financial Times: Sony results hit by hackers and quake

Sony has posted a Y260bn ($3.18bn) net loss for the year ended March 31 due to the impact of Japan’s quake and tsunami and the hacker attacks that forced it to shut down its PlayStation Network, the Japanese electronics company revealed in a preliminary earnings statement Monday.

The company had called a news conference on Monday for 5.30pm local time to announce the revision. Companies listed on the Tokyo Stock Exchange are required to inform investors if they believe they will miss earnings targets by 30 per cent or more.

Sony was scheduled to report fourth-quarter and full-year results on Thursday. Analysts had been expecting a Y76bn profit and the company had forecast net income of Y70bn.

Last week Sir Howard Stringer, chief executive, acknowledged that Sony would lose money and customers as a result of the theft of customer information by the hackers, though he did not say how much.

Names, addresses and network passwords belonging to 100m people, including all PSN users, were stolen in the attack.
I can't find the 2010 thread but here is the one from 2009: Sony to post first loss in 14 years of ¥150B
 
#2
Sony seems like such a mismanaged company these days, I think its time to trim some fat from the PlayStation division.... too many products in the pipeline and they own way too many developers.
 

LiquidMetal14

hide your water-based mammals
#3
Zinga said:
Sony seems like such a mismanaged company these days, I think its time to trim some fat from the PlayStation division.... too many products in the pipeline and they own way too many developers.
?

Not everyone gets hacked and has earthquakes and such. Not that they weren't going to post a modest loss but who knows really.

It's easy to see from a fiscal year standpoint though. Need more coffee :p
 
#4
Sony has posted a Y260bn ($3.18bn) net loss for the year ended March 31 due to the impact of Japan’s quake and tsunami and the hacker attacks that forced it to shut down its PlayStation Network, the Japanese electronics company revealed in a preliminary earnings statement Monday.
The PSN shutdown didn't occur until after this FY ended Mar 31, almost a month later, in fact. No correlation. But NEXT quarter's results will definitely be affected.
 
#5
The underlying results are very good ($2.3bn operating profit), but the Earthquake really messed with them. They had 5 production centres shut down at one point, and the last one reopened some time last week.

In reality this means absolutely nothing. Taking a massive upfront charge is probably a good thing, it means that the pain is all out of the way. They probably wrote down a number of assets as well.

Sure the headlines aren't great, but the operating profit was pretty good. Next year should see Sony reaching their 5% operating profit margin, if not higher.
 
#6
vireland said:
The PSN shutdown didn't occur until after this FY ended Mar 31, almost a month later, in fact. No correlation. But NEXT quarter's results will definitely be affected.
Correct, nice catch. That explains why the other two news sources didn't blame it on the PSN situation.
 
#8
Daaaaaamn. Will be interesting to get the breakdown between divisions.

And they won't get any quick fix Q1 2012 with the disaster of a quarter they had.
 
#10
zomgbbqftw said:
Next year should see Sony reaching their 5% operating profit margin, if not higher.
How can you be so sure Sony will be profitable next year when they have now had three straight years with an annual loss, followed by PSN going down?
 
#11
thankfully the economy is in an upswing, although not that much.

Things will pick up for Sony. At their very core, they are a good company with plenty of talent.

Now would be a perfect time to buy their stock though..
 
#12
The company maintained its estimate of an operating profit of 200 billion yen, which compares with analysts' consensus of 197 billion yen, according to a SmartEstimate by ThomsonReuters I/B/E/S.
Operating income, or sales minus the cost of goods sold and administrative expenses, increased to about 200 billion yen while revenue declined 0.5 percent to 7.18 trillion yen, Sony said. That compares with the 206 billion yen and 7.2 trillion yen averages of analyst estimates compiled by Bloomberg.
So basically they have met the forecasts/sale targets, its just the recovering costs after the earthquake/tsunami ate all that profit and then some more.
 
#13
LiquidMetal14 said:
?

Not everyone gets hacked and has earthquakes and such. Not that they weren't going to post a modest loss but who knows really.

It's easy to see from a fiscal year standpoint though. Need more coffee :p
They weren't hacked during their fiscal year and the tsunami only happened 3 weeks before the end of it.
 
#14
xbhaskarx said:
How can you be so sure Sony will be profitable next year when they have now had three straight years with an annual loss, followed by PSN going down?
PSN being down won't have nearly as a much impact as the earthquake and tsunami did. Not even close.

Let's not forget, only 11M of the 77 accounts actually had credit cards in them. That tells you how much of an income they get from it.

Monty Mole said:
They weren't hacked during their fiscal year and the tsunami only happened 3 weeks before the end of it.
So?
 
#15
In a statement this morning Sony have given an estimate of the costs of the PSN Hack. The statement is an update on their financial forecasts that they have produced ahead of their more extensive financial results that we are expecting later this week.

Naturally they do not refer to the episode as a hack, calling it “the unauthorised network access”. They state that their estimate of the currently known costs resulting from the cyber attack are ¥18 billion. In monetary terms you are more likely to understand that is £137m or $221m.

Understandably of far larger impact to their financial situation is the Great East Japan Earthquake and its after-effects. For the year to 31st March 2011 Sony say they expect it to have reduced their operating income by ¥17bn (£129m, $208m).

The impact of the earthquake and tsunami to Sony’s bottom line will of course be much greater during their current financial year as it happened so close to the end of their last. For the year ending 31st March 2012 they anticipate a reduction of approximately ¥150bn (£1.14bn, $1.84).
source: http://www.thesixthaxis.com/2011/05/23/sony-cost-psn-hack/

more here:

http://www.sony.net/SonyInfo/IR/financial/fr/index.html
 
#16
So could it be possible they put their costs up front (regarding the quake and all related future expenses) to make the next FY look better?



Ok so if I'm reading that right (and I doubt I am), the earthquake + hacking accounts for only a small fraction of their loss for FY 11?
 
#18
Metalmurphy said:
Monty Mole said:
They weren't hacked during their fiscal year and the tsunami only happened 3 weeks before the end of it.

So?
From the very next comment: "The impact of the earthquake and tsunami to Sony’s bottom line will of course be much greater during their current financial year as it happened so close to the end of their last. For the year ending 31st March 2012 they anticipate a reduction of approximately ¥150bn (£1.14bn, $1.84)."
 
#19
LiquidMetal14 said:
?

Not everyone gets hacked and has earthquakes and such. Not that they weren't going to post a modest loss but who knows really.

It's easy to see from a fiscal year standpoint though. Need more coffee :p
People have already mentioned that the hack hadn't occurred by the time the financial reporting period had ended, but Sony have some information in their presentation slides on their website (numbers are estimates or projections): -

Impact of earthquake on operating income in FY 2011 = 17 billion Yen ($207 million)
Impact of earthquake on operating income for FY 2012 = 150 billion Yen ($1.83 billion)

Impact of hacks on operating income for FY 2012 = 14 billion Yen ($171 million)

Taken from: -

http://www.sony.net/SonyInfo/IR/financial/fr/10revision_sonypre.pdf
 
#20
xbhaskarx said:
How can you be so sure Sony will be profitable next year when they have now had three straight years with an annual loss, followed by PSN going down?
Their underlying profitability is very good. They took a 360bn JPY charge this year for a tax write off and around 10bn worth of charges related to the earthquake. Neither of these are real, well they are, but it's a one off charge that doesn't affect their ability to do business.

If Sony had an annual charge/write down of 360bn JPY, then yes, I would say their ability to business is seriously hampered and it doesn't look good for them, but in this case it makes little to no difference. This can be seen in the lack of movement in their share price after the announcement.

If you don't work in finance it can be confusing to read a headline like $3.2bn loss then read a comment like mine which is clearly very positive. If you look beyond the headline:

"The company maintained its estimate of an operating profit of 200 billion yen, which compares with analysts' consensus of 197 billion yen, according to a SmartEstimate by ThomsonReuters I/B/E/S. SmartEstimates place additional weight on recent forecasts by top-rated analysts."

It starts to make sense.

Edit: Taken from Sony.net:

Net income (loss) attributable to Sony Corporation’s stockholders is expected to decrease by approximately 330 billion yen from the February forecast primarily due to the following factor:
• A non-cash charge to establish a valuation allowance of approximately 360 billion yen against certain deferred tax assets in Japan. Sony evaluates its deferred tax assets on a tax jurisdiction basis to determine if a valuation allowance is required. In Japan, Sony Corporation files a stand-alone tax filing for local tax purposes and a consolidated national tax filing with its wholly-owned Japanese subsidiaries for national tax purposes. Sony Corporation and its national tax filing group in Japan are in a three year cumulative loss as of March 31, 2011. Under U.S. GAAP, a three year cumulative loss is considered significant negative evidence regarding the realizability of deferred tax assets, which is
difficult to overcome, particularly given the relatively short tax loss carry forward period of seven years in Japan and the adverse impact of the Earthquake on the near term forecast for entities in Japan. Accordingly, Sony determined in the fourth quarter of the fiscal year ended March 31, 2011 that it was required under U.S. GAAP to establish a valuation allowance against certain deferred tax assets in Japan.

The non-cash charge to establish a valuation allowance does not have any impact on Sony’s consolidated operating income or cash flow, nor does such an allowance preclude Sony from using the loss carry forwards or other deferred tax assets in the future. For the fiscal year ending March 31, 2012, Sony expects that consolidated sales will be higher, that operating income will be approximately the same as for the previous fiscal year and that it will record net income attributable to Sony Corporation’s stockholders, despite the impact of the Earthquake. It is also important to note that the establishment of this valuation allowance does not reflect a change in Sony’s view of its long-term
corporate strategy.
Key parts bolded by me. The loss is from a one off tax charge that literally makes no difference to their underlying business. It looks like it is a paper loss, but I'll take a proper look on Thursday.
 
#21
xbhaskarx said:
From the very next comment: "The impact of the earthquake and tsunami to Sony’s bottom line will of course be much greater during their current financial year as it happened so close to the end of their last. For the year ending 31st March 2012 they anticipate a reduction of approximately ¥150bn (£1.14bn, $1.84)."
Doesn't mean that it didn't have a big impact on the last one as well.

"Understandably of far larger impact to their financial situation is the Great East Japan Earthquake and its after-effects. For the year to 31st March 2011 Sony say they expect it to have reduced their operating income by ¥17bn (£129m, $208m)."
 
#22
IchigoSharingan said:
So could it be possible they put their costs up front (regarding the quake and all related future expenses) to make the next FY look better?



Ok so if I'm reading that right (and I doubt I am), the earthquake + hacking accounts for only a small fraction of their loss?
Wouldn't that be illegal as it is lying to investors?
 
#23
surly said:
People have already mentioned that the hack hadn't occurred by the time the financial reporting period had ended, but Sony have some information in their presentation slides on their website (numbers are estimates or projections): -

Impact of earthquake on operating income in FY 2011 = 17 billion Yen ($207 million)
Impact of earthquake on operating income for FY 2012 = 150 billion Yen ($1.83 billion)

Impact of hacks on operating income for FY 2012 = 14 billion Yen ($171 million)

Taken from: -

http://www.sony.net/SonyInfo/IR/financial/fr/10revision_sonypre.pdf

Damn..... just damn...




boris feinbrand said:
Wouldn't that be illegal as it is lying to investors?
There are plenty of accounting tricks. :p But this doesn't seem to be the case. They are pushing the cost of the quake to 2012. But now I'm curious what accounts for their heavy loss for FY 11.

Looks like it's mostly deferred tax assets.
 
#27
xbhaskarx said:
How can you be so sure Sony will be profitable next year when they have now had three straight years with an annual loss, followed by PSN going down?
lol PSN going down is going to have a negligible affect on Sony as a whole.
 
#28
Metalmurphy said:
Doesn't mean that it didn't have a big impact on the last one as well.

"Understandably of far larger impact to their financial situation is the Great East Japan Earthquake and its after-effects. For the year to 31st March 2011 Sony say they expect it to have reduced their operating income by ¥17bn (£129m, $208m)."
In your own post, they estimated the effects of the quake to be at ¥17bn for FY2011, but they made a loss of ¥260bn which is ¥330bn down on where they expected to be.

So earthquake aside, and given that the hacking didn't even happen in FY11, it shows some bigger company issues if they're forecasting profit but making significant losses. If we take the earthquake out of the equation, they still made a ¥243bn loss.
 

gofreak

GAF's Bob Woodward
#29
So, who's gonna get hit with the PSN hack costs?

SCE?

SNE?

Timely for SCE to have spun out network operations if they can push it onto the latter ;)
 
#30
Monty Mole said:
In your own post, they estimated the effects of the quake to be at ¥17bn for FY2011, but they made a loss of ¥260bn which is ¥330bn down on where they expected to be.

So earthquake aside, and given that the hacking didn't even happen in FY11, it shows some bigger company issues if they're forecasting profit but making significant losses.
The OP should make clear that the loss stems from a ¥360bn tax charge, a non-cash one at that. It means literally nothing right now. The real costs will come next year in the shape of a ¥150bn charge for the earthquake which will be taken as lost income and damage to factories which costs real money.
 
#31
TTP said:
Yeah. That's what it looks like to me.

You better pay your bills on time Sony!
If I remember my accounting classes correctly, deferred tax assets are basically pre-paying your taxes. It will be a future tax benefit. So Sony, despite the PSN and earthquake damages, should be able to post very favorable numbers in future earnings reports.
 
#32
zomgbbqftw said:
The OP should make clear that the loss stems from a ¥360bn tax charge, a non-cash one at that. It means literally nothing right now. The real costs will come next year in the shape of a ¥150bn charge for the earthquake which will be taken as lost income and damage to factories which costs real money.
Were they not expecting the tax charge? I don't understand how they couldn't have known that a tax charge was due when they were making their ¥70bn profit estimate.

- genuine question btw.
 
#33
Yes, Sony have taken, I think 3 years worth of tax payments on board to comply with US regulatory requirements. None of that money has actually been paid though. It makes for nice headlines and thread titles, but in reality it means very little.
 
#35
Monty Mole said:
Were they not expecting the tax charge? I don't understand how they couldn't have known that a tax charge was due when they were making their ¥70bn profit estimate.

- genuine question btw.
From my first read of Sony's statements it looks like they have taken the charge to meet US regulatory requirements:

"Accordingly, Sony determined in the fourth quarter of the fiscal year ended March 31, 2011 that it was required under U.S. GAAP to establish a valuation allowance against certain deferred tax assets in Japan."

So it's entirely a paper loss, which is reflected in the lack of movement in their share price.
 
#36
Wow... I don't really know a lot about this stuff, but going from a projected "break-even" of $70 million profit to a loss of $3.2 billion sounds like a horrific event for a company. This is major, right?

I've tried reading the other posts to get a more clear understanding, but none of it makes sense to me.
 
#38
zomgbbqftw said:
Yes, Sony have taken, I think 3 years worth of tax payments on board to comply with US regulatory requirements.
Can you explain what this means to a money noob?

Why is it not bad?

Edit: Above post is helpful but how about the 2 sentence summary version :p.
 
#39
teh_J0kerer said:
Can you explain what this means to a money noob?

Why is it not bad?

Edit: Above post is helpful but how about the 2 sentence summary version :p.
It means Sony have set money aside for future tax payments and taken it as a current loss. Kind of like pre-paying your taxes.
 
#40
Grinchy said:
I've tried reading the other posts to get a more clear understanding, but none of it makes sense to me.
I actually understand this LESS after reading these comments then I thought I did when I first read the articles...
 
#43
zomgbbqftw said:
It means Sony have set money aside for future tax payments and taken it as a current loss. Kind of like pre-paying your taxes.
Why would they do that?
Why would they suddenly do that just now, and go from $70M profit to $3.2B loss, so that they are forced by Japanese law to inform investors because they're missing earnings targets by over 30%?
Why would they do that for 2010-11 when they were otherwise going to post a profit, and not for 2011-12 when they already have the negative effects of the PSN hack and earthquake/tsunami?
If that's all it is, why would it hurt Sony stock?
 
#45
Metalmurphy said:
Kind of an odd time to do so no?
Well if my reading is correct (and it might not be, I'm an investment analyst, not an accountant), they did it to meet US regulatory requirements. I think they do enough of their business in the US now that they can no longer just meet Japanese regulations, they must also declare GAAP income.

The relevant non-GAAP operating income was ¥253bn as listed in the supplementary information from their release.
 
#46
xbhaskarx said:
Why would they do that?
Why would they suddenly do that just now, and go from $70M profit to $3.2B loss, so that they are forced by Japanese law to inform investors because they're missing earnings targets by over 30%?
Why would they do that for 2010-11 when they were otherwise going to post a profit, and not for 2011-12 when they already have the negative effects of the PSN hack and earthquake/tsunami?
Investors care about future results, not current results.

Billing it on next year would have been horrendous for their stock.
 
#47
I'm not surprised... they missed the Tablet boat, Don Mattrick got them by the balls with Kinect and Xbox 360, Sony Erricson got spanked by Samsung and Apple and at the end of the day 3D isn't taking off the way all the electronic/entertainment companies would've liked and predicted.
 
#48
zomgbbqftw said:
Well if my reading is correct (and it might not be, I'm an investment analyst, not an accountant), they did it to meet US regulatory requirements. I think they do enough of their business in the US now that they can no longer just meet Japanese regulations, they must also declare GAAP income.

The relevant non-GAAP operating income was ¥253bn as listed in the supplementary information from their release.
Isn't it pretty short sighted then to estimate a profit when those taxes were up to pay anyway?
 
#49
boris feinbrand said:
Isn't it pretty short sighted then to estimate a profit when those taxes were up to pay anyway?
Well no, it's not really clear you need to meet extra regulations until you need to meet them. So you operate under the assumption that you don't. I mean you don't live by Sharia Law under the off chance you will convert to Islam?
 
#50
xbhaskarx said:
Why would they do that?
Why would they suddenly do that just now, and go from $70M profit to $3.2B loss, so that they are forced by Japanese law to inform investors because they're missing earnings targets by over 30%?
It has little to do with the now. Think about the trend Sony has been in the last few years. They have been restructuring, they have been laying off, they have faced a nasty and slow economic downturn. Yes they posted profits. That doesn't mean they expected it would be the case for the years to come.

So what do?

Put some earnings into a valuation allowance against deferred tax assets. This is a move of playing it safe. If they continue their recovery against the PSN/earthquake damage, they will then be able to wipe out their valuation allowance, thus showing more confidence in their profitability.

Let's just say they'd be silly not to do this right now.