TOKYO Sony Corp. has lowered its sales forecast a second time for the year, but said it still expects to make a profit. The company also said it will cut about 5,000 jobs to improve profitability this year.
With the second revision, Sony forecasts its sales for the year ending March 31 to reach about $64 billion, or 3 percent above last year's level. Profits are expected to drop year on year, with operating profits of $1 billion expected, down 47 percent from last year, and net income of $85.5 million, 40 percent lower than year-ago levels.
While Sony has forecast a profit, analyst Kazuharu Miura of Daiwa Institute of Research Ltd., said: "There is a possibility that the games and music business may go worse than expectation. Audio and video product sales in the Christmas season will not be favorable. It is possible for Sony to have to revise again, and at that time Sony have to forecast a loss, not a profit."
The revision follows one made in July when Sony announced its first-quarter results. "The world business cycle has entered a downward trend, which is having a bigger impact than expected on Sony's results," said Sony chief executive officer said Nobuyuki Idei. "As a consumer electronics manufacturer, we are turning our products to network-ready ones. This technical change will also have a bigger impact on our business. Sony has been actively reengineering its business processes. But environmental change may have been occurring much faster than Sony's change."
The downward trend and swift technological changes will continue for two to three years, said Idei.
"The terrible terrorist attack threw us into a completely different world from the world before the attack," Idei said. "People now worry about what will happen in the future." No one could make a practical estimate of the impact of the terrorist attacks at present, Idei said.
Sony's latest revision therefore includes a preliminary estimate of the attacks' aftermath, and Sony said the further ramifications of the events remain uncertain.
Sony said it expects its sales in the United States will drop about 10 percent this fiscal year, but Idei emphasized that the decline should not be interpreted as a result of the attacks.
"Around June, we recognized that worldwide economic deceleration was not a passing slump," said Kunitake Ando, president and chief operating officer of Sony. As a result, Sony accelerated countermeasures to reengineer its business process.
Sony will focus on key businesses by reducing product categories. It will shrink or withdraw from 20 product areas this fiscal year, in addition to the 28 areas trimmed last year. The company will also cut material costs by 15 percent this year.
To reduce fixed costs, Sony said it intents to cut about 5,000 jobs worldwide. About $167 million has been appropriated to facilitate early retirement of employees in Japan, Europe and the United States, the company said.