Hit by yen, Thai floods, Sony sees wider net loss

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By MALCOLM FOSTER, Associated Press

TOKYO (AP) — Hammered by weak TV sales, a strong yen and production disruptions from flooding in Thailand, Sony Corp. on Thursday reported a net loss of 159 billion yen ($2.1 billion) for the October-December quarter and more than doubled its projected loss for the full fiscal year.

The Japanese electronics and entertainment company, which a day earlier announced that Kazuo Hirai will replace Howard Stringer as CEO and president effective April 1, predicts a net loss of 220 billion yen ($2.9 billion) for the year through March, much bigger than an earlier forecast of 90 billion yen.

That would be fourth straight year of red ink for Sony, which is struggling to regain its once-powerful stature and creative flair that made it a dominant force in the global electronics industry in the 1980s and early 1990s.

Hirai, 51, who leads the company's core consumer products business, was groomed to replace the Welsh-born Stringer, one of the few foreigners to lead a major Japanese company, He will retain his post as chairman.

A key priority for Hirai, currently executive deputy president, will be turning around Sony's money-losing TV business — battered by competition from South Korea's Samsung Electronics Inc. and others.

Hirai, who also led Sony's gaming division earlier in his career, also must guide Sony as it faces increasingly intense competition in the gaming sector from Apple Inc.'s iPod and iPhone and Nintendo Inc.'s DS handheld.

"Sony must steer a new course. We will need to make many painful decisions and execute them, but I believe these are unavoidable for Sony's future," Hirai told a packed news conference after the earnings were announced.

"Sony will surmount difficulties and challenges and realize a transformation so that we may achieve a lofty goal of becoming a truly leading Japanese company in this competitive world," he said.

Stringer, who led Sony since 2005, said he began thinking about successor in 2009, when he named Hirai and a few other young executives to a new management team.

"I believed my ultimate successor would be among them, and I was right," he told the news conference.

"Why now? Because he's ready," Stringer said, referring to Hirai. " We need him in charge as we redouble our efforts of recovery. And the stage is set for that recovery."

Hirai outlined some of his strategic priorities in spurring a recovery, which included a commitment to reviving the TV business, strengthening the company's mobile phone business and push into the field of medical technology.

Natural disasters at home — the March 11 earthquake and tsunami, which disrupted production — and abroad — flooding in Thailand, where two of its factories had to be shut down — also took a toll on Sony's business over the past year.

The forecast for a larger annual loss also stemmed from two temporary factors linked to Sony's withdrawal from two joint ventures. One was Sony's sale of its stake in S-LCD, a liquid crystal display joint venture with Samsung, which resulted in an impairment loss of 63.4 billion yen. Another was Sony's decision to take full ownership of mobile phone maker Sony Ericsson, which led to a 33 billion yen charge on valuation allowance on deferred tax assets.

Sony, which makes about 70 percent of its sales outside Japan, has also been hurt by the strong yen, which erodes overseas earnings when repatriated to Japan.

Quarterly sales fell 17.4 percent to 2.21 trillion yen, the company said.

Stringer acknowledged that Sony, "like much of Japan, is in real difficulty." But he suggested it would be unwise to bet against the company, as it had weathered the global financial crisis and other setbacks.

"We have bounced back twice, and don't bet against us bouncing back again," he said. "It would be very nice if there were not earthquakes, no floods, no hackers, no anything, but on our own skills we can get the company back."

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