­­Sony returns to profit after cutting costs

City A.M. Reporter
Sony’S first profit in five quarters yesterday showed a restructuring at the electronics maker is starting to pay off as it halved its annual loss forecast on a rebound in its flat-TV business and cost cuts.

Third quarter to December profit was also driven by its insurance division, whose investments were buoyed by a recovery in Japanese shares.

The company – headed by Howard Stringer – has shed jobs and shut plants following the global economic downturn and has worked to shore up its flat TV division, which has struggled amid stiff price competition with Samsung Electronics and other rivals.

“Earnings have bottomed out... whether the recovery will continue in the next business year depends largely on its TV operations and videogames,” said analyst Kazuharu Miura at Daiwa Securities Capital Markets. “Sony has carried out a drastic restructuring in its TV operations, but competition will continue to be tough, which will put downward pressure on prices and profit margins.”

To further boost competitiveness, the maker of Cyber-shot digital cameras, Bravia LCD televisions and Vaio PCs plans to launch a new content distribution service and 3D TVs this year.

Sony posted an operating profit of 146.1bn (£1bn) for October-December, against a loss of 17.96bn yen a year earlier. Net profit increased eight times to 79.2bn yen while sales rose 3.9 per cent to 2.24 trillion yen.

The firm slashed nearly 20,000 jobs in the year to September 2009 and is aiming to cut procurement costs by 20 per cent to 2 trillion yen in the year to March 2010, boosting profitability.

In the latest quarter its TV operations posted a profit for the first time in two years, but are expected to remain in the red for the full year.