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Sony Looks To Games For Financial Recovery

Sony executives are poised to take pay cuts up to 50 percent and forgo all bonuses in the wake of a projected $1.27 billion fiscal year loss. Sony has already set plans in motion to drop its PC computer business at the cost of approximately 5,000 employees.

At the start of the fiscal year, the company projected ¥50 billion ($490.28 million) net income at the start of year, lowering that forecast to ¥30 billion ($294.17 million) following the second quarter (September 30, 2013). In February, the company suggested a loss of ¥110 billion ($1.08 billion), and will fall short of even that.

The company’s full turnaround strategy will be shared on May 22, but CEO Kaz Hirai is expected to reiterate his plan to reorganize around three pillars: imaging devices, mobile, and gaming. Sony has sold over 7 million PlayStation 4 consoles to customers in 49 markets around the world as of March.

The gaming unit has evidenced profit, in part thanks to exceeding the original expectation of 5 million PS4s by March 31. Despite that, layoffs have hit Sony Computer Entertainment around the world.

Sony is set to report its year-end financials on Wednesday at 5:50 p.m. JST (4:50 a.m. Eastern). We’ll have a full update shortly after.

[Source: Wall Street Journal]

 

Our Take
On the surface, the loss Sony faces this year is extremely troubling. Compared to where it thought the year would end in its initial forecast, the results are atrocious. In order for the PlayStation 4 success to mean anything, Sony must buoy the entire ship.

Despite the strong performance of the gaming unit, the struggles throughout the company’s other sectors have had a negative influence on studios and staffing. Projects have been canceled, including those under development for a number of years. 

It’s smart for gaming to get the spotlight, but Sony can’t cut too much without hurting the long-term prospects. I’m eager to hear what this turnaround plan involves.

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