Sony to break out the red ink

At one time Sony boasted that its business was recession proof. Well, that may end up being an empty boost if reports of flowing red ink at the company are true. The report coming from Reuters suggests that when the company posts its earnings on January 29th they will actually be reporting on a $1.5 Billion operating loss for the business year to March 31st. They had expected to be reporting an estimated ¥200 billion profit.

This will be its first such loss in 14 years and sluggish sales along with a stronger yen are supposedly to blame for the downturn. As well shares in the company have tumbled by 9% which sliced about $2 Billion off of its market cap. Needles to say this kind of news will have an impact on how the company is run on the road forward

The global economic slump has dampened demand for electronics products, causing inventories to pile up and prices to tumble, and Sony (SNE) is feeling the pinch of the downturn in every corner of its operations, which range from semiconductors to movies and insurance.

If it posts such a loss, management could come under pressure to pursue bolder restructuring than the plan unveiled last month that called for curbing investment, exiting businesses and cutting 16,000 jobs. That included 8,000 regular workers, or roughly 4% of its global workforce.

“I think there’s a good chance the company will further accelerate its restructuring from what has been announced in December,” said Daiwa Institute of Research analyst Kazuharu Miura.

Source: Reuters/CNN Money

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