Thursday, February 4, 2010

Sony Corporation (NYSE: SNE): Q3 Earnings Preview 2009

. Thursday, February 4, 2010

By Stock Wizard

Sony Corporation (NYSE: SNE) is scheduled to release fiscal third-quarter 2009 earnings on Thursday, February 4, 2010. Analysts, on average, expect the company to report earnings of 7 cents a share on revenue of $25.51 billion. In the year ago quarter, the company reported earnings of 11 cents per share on revenue of $23.68 billion.

Sony Corporation, together with its subsidiaries, engages in the development, design, manufacture, and sale of electronic equipment, instruments, and devices for consumer and industrial markets in Japan, the United States, Europe, and internationally.

Late in October, the Tokyo-Japan based company posted fiscal second quarter net loss of 26.31 billion yen or US$292 million, compared to a net income of 20.82 billion yen in the previous year. Loss per share was 26.22 yen or US$0.29, in comparison with earnings of 19.83 yen per share in the prior year. For the second quarter, sales and operating revenue dropped 19.8% to 1.66 trillion yen from 2.07 trillion yen in the same period last year, due to factors including slowdown of global economy and the appreciation of the yen. In dollar terms, revenue for the quarter was US$18.46 billion. On a local currency basis, sales decreased 9% year-on-year. Analysts, on average, expected the company to report a loss of $0.37 per share on revenue of $19.17 billion.

For fiscal 2010, the company expects net loss attributable to stockholders of 95 billion yen, compared to 120 billion yen projected in July. Sony still anticipates sales and operating revenue to be 7.3 trillion yen for the fiscal.

The Japanese electronics maker is poised to benefit from agressive cost-cuts, consolidation of its operations and a strong holiday sales. In the second quarter, costs and expenses declined 18.5% to 1.68 trillion yen from 2.06 trillion yen in the comparable quarter last year. Cost of sales dropped 25.1% to 1.13 trillion yen from 1.51 trillion yen in the preceding year. Selling, general and administrative expenses decreased 11.8% to 370.27 billion yen from 419.89 billion yen in the earlier year.

Early in January, Sony Corporation announced that US holiday season sales beat expectations. Sony Corporation said flat-screen televisions, electronic readers and Blue Ray video players helped its US holiday season sales top expectations. The electronics giant said that the sales of Playstation 3 video game console soared 76% to 3.8 million units during the holiday season.

Sony Corp. is implementing additional transformation measures centering on four initiatives to permit further growth and continue to enhance profitability. The company targets these measures to lead to a 5% operating income margin annually and a 10% return on equity by the end of the fiscal year ending on March 31, 2013.

In November, The company said that under the leadership of its new management team established in April 2009, it has reformed its organizational structure to bolster profitability and transform its operations in order to accelerate innovation and growth and optimize business processes, particularly within its electronics and networked service businesses. The reformation helped it to achieve approximately 80% of its targeted 330 billion yen of group-wide cost reductions for the fiscal year ending on March 31, 2010 in the first half of the year. Further, the company said in November that it is now positioned to launch a succession of competitive products from the end of this calendar year and into 2010.

The four turnaround initiatives include consistent profitability in core hardware businesses such as TV, game and digital imaging; provide new user experiences integrating innovative hardware, software and services; reach out to new customers and develop new geographic markets; and lift focus on environmentally conscious products and processes.

Sony is targeting to regain the leading market position in LCD TV business. The company targets the LCD TV business to return to profitability in fiscal 2011 and achieve a 20% worldwide market share on a unit basis in fiscal 2013. The company also plans to create a new revenue model beyond conventional TV business models. Further, Sony expects to introduce "Evolving" TV that delivers new applications over the network and develop new generation displays using proprietary Sony devices.

Sony expects its game business is targeted to return to profitability in fiscal 2011 on revenue increases by expanding hardware/software sales and enriching PlayStation Network services. The company also plans cost reduction and other measures to improve profitability in the business. Additionally, Sony intends to strengthen its digital imaging business through outstanding product differentiation and cost competitiveness based on key devices such as image sensors and imaging engines.

The company intends to expand networked service business by utilizing PlayStation Network services and by integrating attractive hardware, including new mobile products and other consumer electronics, with networked services. The company projects annual revenues of 300 billion yen for the networked service business by the end of fiscal 2013.

As per the company, it plans to strengthen and expand networked mobile business, strengthen collaboration with Sony Ericsson Mobile Communications, a joint venture between Sony and Swedish telecom equipment maker LM Ericsson Telephone Co., accelerate the rollout of e-book business and expand the lineup of network-connected products. Installed user base is projected to be 350 million units by the end of full-year 2013.

Further, Sony targets to launch 3D-related products for the home, including TV, Blu-ray Disc players/recorders and 3D gaming on PlayStation 3 in fiscal 2011. The company will also provide solutions for 3D content production, distribution and theatrical projection to lead the field in broadcast and professional businesses. 3D-related products are expected to generated revenues of more than 1 trillion yen excluding content in fiscal 2013.

The company's growth strategies for lithium-ion battery business include securing high profitability in existing businesses and analyzing possible entry into new business domains such as storage/e-Vehicle battery.

The company's stock currently trades at a forward P/E (fye 31-Mar-11) of 25.09. In terms of stock performance, Sony shares have gained 76 percent over the past year.

Full Disclosure: None.

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