Sony revised the financial outlook for its current fiscal year on Thursday, cutting estimates for sales and operating income, but raising its estimate for net income.
The company said it expects sales and operating revenue for the year to March 31 to be approximately ¥7.15 trillion (US$69.6 billion), operating income to be about ¥110 billion and net income to be about ¥150 billion.
The downward revision in sales and operating revenue, which had previously been forecast to be ¥7.35 trillion, and operating income, previously predicted to be ¥160 billion, was blamed on lower demand and greater competition in several key sectors of Sony's electronics business.
Competition in the portable audio market and a greater than anticipated drop in the selling price of several products including televisions, DVD recorders and video cameras was partly to blame, said Katsumi Ihara, group chief financial officer for Sony, at a Tokyo news conference. Demand for semiconductor products was also lower, he said.
Prices for flat-screen televisions fell between 20 per cent and 30 per cent year-on-year and the average price of DVD recorders dropped by 40 per cent, said Takao Yuhara, corporate senior vice president in charge of finance and investor relations at Sony.
"This fast and massive decrease in price was unthinkable," Ihara said. The price competition and lower profits came as Sony increased its market share in several key product areas, including televisions, he said.
"Cost reduction for the display business is an urgent area that we have to address," Ihara said. "As sales increase, the profit has to increase so in this respect we have more to do."
The revised net income forecast is an upward revision from the previous target of ¥110 billion and has been realized because Sony expects its income tax bill in the US will be lower than expected. The tax bill will fall because Sony will reverse $660 million of valuation allowances held against deferred tax assets. The reverse is being made because of improved business conditions at some of its US units. The company did not specify which units these are.