TOKYO — Sony slashed its full-year profit forecast Thursday because of costs from a global recall of laptop batteries and price cuts in Japan for the next-generation PlayStation 3 video game console.
Sony Corp. now expects group net profit of 80 billion yen, or $673-million (U.S.), for the fiscal year through March 2007, down 38 per cent from the 130 billion yen it had projected in July.
The revision reveals the deep troubles at the Japanese manufacturer as it tackles a turnaround under its first foreign chief executive, Welsh-born American Howard Stringer.
Sony may need to further lower its projections as losses related to the battery recall may grow, said Tatsuya Mizuno, analyst a Fitch Ratings in Tokyo. Toshiba has said it may demand damage compensation from Sony, and others may follow suit.
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“The battery problem is not a simple one-time problem for Sony because it hurts the company's reliability as a supplier in its core electronics sector,” Mr. Mizuno said.
Sony left unchanged its fiscal year sales outlook at 8.23 trillion yen but lowered its operating profit 62 per cent to 50 billion yen from the earlier forecast for 130 billion yen.
The Japanese electronics company said in a statement that it will rack up an extra cost of 51 billion yen in the July-September period for recalls of lithium-ion batteries for laptops announced by practically every major laptop maker in the world.
Sony had initially said the battery recalls will cost the company between 20 billion yen and 30 billion yen.
Sony later announced that the recall affect 9.6 million batteries worldwide. Sony spokesman Takashi Uehara said the 51 billion yen cost associated with the recall does not include “provisions for possible lawsuits” indicating costs may continue to grow.
The problem stems from batteries that can short-circuit, causing some computers to overheat or even burst into flames. Previously, Sony had not provided a figure of how many batteries would be subject to recall.
Meanwhile, a price cut in Japan for the PlayStation 3 console, set to go on sale in November, will decrease earnings for the video game sector, it said.
The production delays for the console, which forced Sony to delay the product in Europe until March next year, will also be costly, Sony said.
Sales and profits for the handheld PlayStation Portable have also been lagging and will push down results, the statement said.
But Sony said despite such setbacks, it is on its way to a turnaround in its core electronics business because of hit products such as the Bravia liquid-crystal display TVs and digital cameras.
The 20 per cent price cut in the PlayStation 3 in Japan announced last month is likely to reduce sales because initial shipments are expected to be limited and sell out. The machines are set to go on sale in Japan and in the U.S. in November.
Sony-made batteries have been recalled in recent weeks by U.S. makers Dell Inc. and Apple Computer Inc., as well as Japanese makers Toshiba Corp., Hitachi Ltd., Fujitsu and Sharp Corp. whose laptops also use Sony batteries.
Sony is joining the recall with its own Vaio laptops and that will also trim earnings for the current fiscal year, Sony said. The total includes the latest recalls of 90,000 batteries in Vaio, Sony said.
The woes are the latest troubles battering Sony as it tries to turn around its business after getting beaten by rivals on key consumer electronics products such as the MP3 digital music player and flat-panel TVs.
It is still struggling in portable music players, where the iPod from Apple Computer Inc. commands top market share not only overseas but in Japan.
But Sony has regained some market share in flat TVs with products using displays produced in a joint venture with Samsung Electronics Co. of South Korea.
Sony shares, which have fallen back after gaining 50 per cent earlier this year, slipped 0.4 per cent in Tokyo to close at 4,790 yen, equivalent to $40.34 (U.S.). The forecast revision was announced just after the market closed.
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