Sony and Toshiba Shares Fall Sharply
The New York Times
Published: Jan 14, 2009
HONG KONG — Stocks in Japan’s leading electronics companies fell sharply on Tuesday amid reports that industry giants Sony and Toshiba will see an operating loss in the current financial year, as plummeting demand and a strong yen take their toll on sales.
A person with knowledge of the matter, speaking anonymously because the information is not public yet, told Reuters that Sony may post an operating loss of about $1.1 billion in the business year that ends in March, in comments that echoed reports by several Japanese media on Tuesday.
If confirmed, it would be the first full-year loss for the maker of the iconic Walkman portable player and PlayStation 3 games console in 14 years.
Sony declined to comment on the report, but its shares fell 7.7 percent by early afternoon as investors worried that Sony’s third-quarter earnings announcement, due Jan. 29, could include nasty surprises as the economic environment continues to worsen.
Among other things, the company has said it would detail far-reaching cost and job cuts it announced on Dec. 9, as it looked to cut costs by ¥100 billion a year.
Similarly, Japanese media reported that Toshiba, too, will post what would be its seventh full-year loss because of worsening chip operations. A Toshiba spokesman, Keisuke Ohmori, said the company has not revised its figures “at this time, despite the difficult environment.”
Like Sony, Toshiba is due to report its third-quarter performance, for the three months to the end of December, on Jan. 29.
Toshiba shares fell 7.4 percent by early afternoon, while the overall Nikkei 225 index was 4.2 percent lower in Tokyo. Elsewhere in the sector, Canon fell 6.7 percent, Sanyo 4.2 percent and Panasonic 7 percent.
The coming earnings season — and Japanese trade data next week — is expected to reflect several challenges facing Japanese exporters: demand in the United States and Europe has been flagging for months as consumers cut back or delay spending on goods that are not essential, like computer games, flat screen televisions and cars; and the yen remains strong compared to the dollar and euro, making Japanese goods more expensive for U.S. and European shoppers.
With the Japanese economy already in recession, companies have delivered a string of profit warnings in recent months, scaled back output and cut jobs. More such announcements are widely expected, analysts and economists say.
Sony in October revised its operating profit forecast for the financial year to 200 billion yen, 58 percent lower than its earlier target. Then on Dec. 9 it announced that it would cut 8,000 full-time jobs —5 percent of the 160,000-strong workforce at its electronics business — and rein in planned investment, while shutting several plants in response to what it called the “sudden and rapid changes in the global economic environment.”
Analysts at the time said that more measures might be necessary as the global downturn drags on.
In morning European trading, meanwhile, the Dow Jones Euro Stoxx 50 index, a barometer of euro zone blue chips, fell 2 percent, while the FTSE 100 index in London was down 1.7 percent. The CAC 40 in Paris slid 2.2 percent, and the DAX in Frankfurt fell 1.8 percent.
European banks led the market lower. Banco Santander fell 4.1 percent in Madrid after a Wall Street Journal report that the Spanish authorities were investigating the bank over the more than $3 billion its clients lost on investments in the Bernard Madoff scandal. Royal Bank of Scotland fell 5.5 percent, and UBS fell 4.6 percent.
Trading in U.S. index futures suggested Wall Street stocks would open slightly lower. On Monday, the Standard & Poor’s 500 index fell 2.3 percent. The broad U.S. market is now down 3.7 percent in the new year.
U.S. crude oil futures for February delivery fell $1.07 to $36.52 a barrel.
The dollar rose against major European currencies. The euro fell to $1.3266 from $1.3362 late Monday in New York, while the British pound fell to $1.4672 from $1.4822. The dollar rose to 1.1172 Swiss francs from 1.1147.
But the U.S. currency continued to grind lower against its Japanese counterpart, falling to 88.92 yen from 89.21.
© The New York Times. All rights reserved. This article originally appeared in The New York Times.
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