Sony’s profit forecast turns into a $3.2 billion loss

Security breaches of its PlayStation Network and Sony Online Entertainment service followed the March earthquake and tsunami in Japan.

Now the company must overcome an expected annual net loss of $3.2 billion for the fiscal year that ended March 31. That forecast change, announced Monday, will be made official when the company announces its earnings Thursday.

Sony is next expected to use its stage time at theElectronic Entertainment Expo video game convention, running June 7-9, to regain the offensive.

With hot titles such as Uncharted 3: Drake’s Deceptionand Resistance 3 on the horizon, Sony (SNE) has compelling video games that can drive sales of itsPlayStation 3 system and Bravia TVs. And new details are expected on the handheld Next Generation PlayStation Portable, due later this year.

But the PS3 “is losing ground” to Microsoft’s Xbox 360, and dedicated handheld game systems are “a declining market” says Wedbush Securities’ Michael Pachter. “I really think the story is about PSN, and they have to drive home the notion that a breach won’t happen again.”

So far, Sony’s responses to the network breaches have amounted to $170 million in costs.

” We have not received any confirmed reports of customer identity theft issues, nor confirmed any misuse of credit cards from the cyberattack,” said Sony CFO Masaru Kato.

Even though Sony did not notify consumers until days after shutting down the PlayStation Network in April, Sony CEO Howard Stringer defended its response. ” We were very careful and very responsible,” he says.

With efforts such as its recently revealed Welcome Back program, which includes free game downloads and free movie rentals, Sony can entice loyal customers to return, he says.

Sony lost an estimated $268 million in sales this year because of the earthquake, and it expects to lose about $1.8 billion in the fiscal year ending March 31, 2012. Still, the company’s financials show “progress (that) has been under-recognized,” says analyst Daniel Ernst of Hudson Square Research.

The company’s operating profit for the fiscal year is expected to be sixfold its 2010 results ($2.4 billion); the net loss comes from a $4.4 billion tax accounting write-off. Otherwise, Sony’s business “was actually pretty good,” Ernst says. “But the market will likely keep them in the penalty box until the hard numbers move north again.”

Contributing: Brett Molina

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Posted on May 24, 2011, in Home. Bookmark the permalink. Leave a comment.

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