Sony drastically cuts earnings forecast

Sony has issued a profit warning in which the electronics giant predicts that net profit this year will be 38 percent lower than previously expected. The reasons are the rising yen and the deteriorating global economy.

Sony expected to make a net profit of 150 billion yen in the 2008 financial year – which ends in March 2009 – or 1.2 billion euros. With this, the company is lowering expectations by 38 percent compared to the last forecast in July. According to Sony, the lower expected profit is mainly attributable to the Japanese yen, which has appreciated against both the euro and the dollar in recent months. As a result, the export of Sony products has become more expensive and its competitive position against the South Korean competition has weakened.

In addition to the decreasing yen, the company states that increasing competition in the electronics segment is depressing profits. The LCD TV and digital camera divisions, among others, will perform below expectations. Although Sony has issued a hefty profit warning, analysts are concerned that the trough has not yet been reached. The electronics giant has not yet factored in losses incurred by the company on the Japanese stock exchange after October 1. An unnamed analyst states that there is even a good chance that the company will have to record red numbers this year.