- The Washington Times - Thursday, May 26, 2011

The aftershocks from Japan’s devastating earthquake and tsunami in March are being felt on corporate bottom lines as electronics giant Sony Corp. Thursday became the latest manufacturer to take a major hit to its books.

The electronics giant, which once dominated the video game and television industries, suffered a $3.2 billion loss for the year that ended March 31, 2011 — the company’s biggest net loss in 16 years. It was a stark contrast from the $860 million profit it had been expecting, with company officials saying the earthquake and a massive security breach in online accounts of Sony customers took a financial toll.

The maker of PlayStation game consoles and Bravia televisions estimated the disaster, which damaged 10 production plants and disrupted supply chains, had a $269 million adverse impact on sales.

“The earthquake is undoubtedly a challenge,” said Geoff Blaber, an analyst with CCS Insight, who follows Sony from London. “I think they’ve managed as best they can.”

Sony also is dealing with the fallout from a security breach that compromised more than 100 million online accounts. It cost the company about $170 million to investigate the hacking, improve network security and purchase identity-theft insurance for customers.

But Sony officials said Thursday they hope recovering sales will end a string of three straight losing years, projecting a $975 million profit for the current fiscal year. Analysts from the investment firm Macquarie Group this week upgraded Sony’s stock to “outperform” from “neutral,” saying that uncertainty about the impact of the disaster and network intrusion has now been clarified.

“We now have greater comfort around the fiscal 2011 outlook,” the Macquarie report said.

Sony is one of a number of Japan companies that was hit hard by the disaster.

Canon Inc. is bracing for profits to fall 11 percent to $2.7 billion for the year ending in December, compared with its previous forecast of a 26 percent increase. The world’s largest camera maker said the disaster cost the company an estimated $3.8 billion in sales.

“The future … remains unclear,” Toshizo Tanaka, Canon’s executive vice president and chief financial officer, said in a call to investors and analysts.

Sony’s rival in the video game industry, Nintendo, reported last month the company’s net income dropped from about $2.8 billion in the previous year to about $946 million.

Japanese automakers were hit particularly hard. Car production among Japanese companies dropped 57.3 percent to 404,039 units in March compared with 2010, according to the Japan Automobile Manufacturers Association.

Mazda blamed the disaster for a $77 million loss for the quarter, compared with about a $12 million profit from a year earlier.

Meanwhile, Toyota and Honda saw diminishing profits, but still managed to make money.

Toyota’s quarterly profit was sliced more than 75 percent to $314 million, and the company is now expected to relinquish its role as the world’s largest automaker.

Story Continues →