Sony will likely suffer an annual operating loss of about $1.1 billion, its first such loss in 14 years, due to sluggish sales and a stronger yen, Reuters reports.
Shares of Sony tumbled 9 percent, down $2 billion off its market value to $22 billion, while rival Toshiba dropped more than 8 percent after Japanese media said that it, too, was headed for a big loss this fiscal year.
Why? The global economic slump has dampened demand for electronics products, causing inventories to pile up and prices to tumble. Sony is reportedly feeling the pinch of the downturn in "every corner of its operations," which range from semiconductors to movies and insurance.
If the company indeed posts such a loss, management could come under pressure to pursue bolder restructuring than the plan unveiled last month, which called for curbing investment, exiting businesses and cutting 16,000 jobs (including 8,000 regular workers, or roughly 4% of its global workforce).
Analysts say Sony will need to pursue more drastic measures, such as laying off more full-time employees and selling its financial unit which has been hurt by falling stock prices.
According to the article, which cites an unnamed source, Sony may post an operating loss of $1.1 billion in the business year to March 31, instead of its previously estimated ¥200 billion profit.
The Nikkei business daily had reported earlier that the loss could double to around ¥200 billion depending on the extent of inventory build-up in the January-March quarter.
Analysts on average see an annual profit of ¥18.5 billion, a poll of 18 brokerages by Reuters Estimates showed.
Sony spokeswoman Mami Imada said the loss figure was speculation and declined to comment further. Similar reports appeared in other media. The company is scheduled to announce its quarterly earnings results on Jan. 29.
As a reminder, Sony is the maker of Bravia flat TVs, Cyber-shot digital cameras and PlayStation game machines, among many others. One suggestion is that the enormous company may need to simply pare down its product offerings.
Also of note is rival Panasonic, who slashed its outlook in response to the economic downturn and promised to step up restructuring measures. Similarly, Toshiba may have its first annual operating loss in seven years because of its deteriorating chip business.