Sony Cuts Forecast, Details Battery Recall

Sony Corporation has announced it is cutting its profit forecast for its fiscal year down to 50 billion yen (around $421 million USB) from its July estimate of 130 billion yen (about $1.1 billion USD). The company also cut its net profit forecast for the year from down to 80 billion yen, a reduction of nearly 40 percent. The reduced profit forecasts are larger than many analysts anticipated, and represent another significant stumbling block for the electronics giant.

The leading causes of Sony’s current financial shortfalls are a global recall of notebook computer batteries the company manufactured for computer makers like Dell, Apple, Lenovo, Fujitsu, Toshiba, and others. The company says the recall may extend to as many as 9.6 million batteries—rough tallies to this point had put the number of recalled batteries at about 8 million. Sony has also set aside 51 billion yen (about $430 million USD) to handle costs related to the battery recall, although it has not factored in possible costs from any possible legal action brought against Sony by computer makers alleging the battery faults damaged their sales and brand reputations.

The remainder of Sony’s shortfall mainly comes from the company’s game unit, where delays in the launch of the Playstation 3 game console—and component shortcomings reducing the number of systems to be available at launch—have caused Sony to nearly double its estimate for the amount of money the unit will lose this year. Previously, Sony thought its game unit might come in a little more than 1 billion yen shy this year; now, Sony says the game unit will lose almost 200 billion yen (about $1.7 billion USD) owing to the PS3’s delayed launch (it won’t even hit Europe until March 2007) and an announced PS3 price cut in Japan. Sony also lowered its estimates on the number of Playstation Portable (PSP) units it will ship during its fiscal year by about 25 percent to 9 million total units. Meanwhile, rival Nintendo recently boosted its outlook for its Nintendo DS portable system to 20 million units for its current business year.