Sony Corp. Chief Financial Officer Masaru Kato bites his lips during a news conference at the company's head office in Tokyo on Thursday, May 10, 2012. Sony Corp. racked up a record annual loss of $5.7-billion in its fourth straight year of red ink as the once-glorious maker of the Walkman and PlayStation struggles toward a turnaround under a new president.Shizuo Kambayashi
From the FT's Lex blog
At Sony's results presentation on Thursday, one analyst looked beyond the usual obsession with nerdish details and actually asked the big question. What did it say, he wondered, that Sony's shares had fallen since its all-important strategy day last month?
Management was not too sure, suggesting perhaps it could have waited until the full-year results, to be able to provide more substance. Executives also reiterated the "indomitable resolve" of Kazuo Hirai, the new chief, really to change the company.
But therein lies the real answer: investors have heard all this too many times before. Since the infamous "Sony shock" profits warning nine years ago, the Japanese company has spent ¥800-billion ($10-billion) on restructuring, but produced just ¥17-billion in net profits. It never came remotely close to hitting the promised post-shock 10 per cent operating margin nor, since giving up on that, the 5 per cent targeted by Sir Howard Stringer, Mr. Hirai's predecessor.
Investors can therefore be forgiven for reserving judgment. That said, there are signs that plans already under way are bearing fruit: losses in the TV business were about a sixth less than the ¥175-billion expected. But after eight unbroken years of red ink from the division, investors need more than a promise of profit by 2013, given the ¥80-billion of losses pencilled in for this financial year.
Since the strategy day a month ago, Sony's shares have fallen 24 per cent while the Topix is down just 6 per cent. Investors clearly wait to be convinced that Mr. Hirai's plans to cut some 6 per cent of the work force (10,000 jobs) will do more than shrink the company further. That is reasonable. Its cautious profit forecast this year of ¥30-billion is already half forecasts made for last year following the earthquake, but if met would reverse the ¥457-billion losses actually realized in fiscal 2011. Mr. Hirai intends to hold more strategy days like the one in April. This is admirable. But in order to move the company's share price, he will need to produce genuine evidence of a turnround.