Sony woes see Walkman inventor axe divi

electronics giant Sony expects annual losses to swell to ¥230 billion (£1.3bn) and has cancelled dividends for the first time in more than half a century after writing down the value of its troubled smartphone business.

Kazuo Hirai: Sony has failed to stay ahead of sea changes. Picture: Getty

Citing intense competition, especially from Chinese rivals, the group said it anticipates a net loss of ¥230bn for the year to 31 March 2015, up from a previous forecast of ¥50bn.

For the first time since going public in 1958, the Japanese conglomerate which brought the world the Walkman and co-invented the compact disc cancelled dividend payments for the half and full year.

Sign up to our daily newsletter

The i newsletter cut through the noise

“This is the very first time we ever eliminated a dividend,” said Sony’s president Kazuo Hirai. “For more than 50 years we always paid a dividend. The entire management takes this very seriously.”

The company plans to cut staff in its mobile communications business by about 15 per cent, or roughly 1,000 people, Hirai said.

Sony has been trying to reshape its business after years of red ink and has repeatedly promised turnarounds without delivering.

It said the bigger loss for the current financial year stems from a lower valuation of its mobile phone business due to weaker than expected sales. The company is recording an “impairment charge” of ¥180bn in the July-September quarter.

This is purely an adjustment to the company’s balance sheet, involving no cash, but shows the mobile business is far less valuable and will generate lower profits than previously thought.

The smartphone business has proven particularly tough for Sony. Apple and Samsung dominate at the top end while Chinese and other Asian manufacturers are hogging the market for cheaper phones most likely to appeal in fast-growing developing countries.

Hirai said Sony had not managed to stay ahead of sea changes in the industry.

“The Chinese smartphone manufacturers have made great strides and are expanding outside their own market, and this has caused a shift in the pricing,” he said. “Meanwhile, Apple and other manufacturers are launching strong, innovative products. The changes are very rapid and dramatic.” He said Sony expects a loss in its mobile business this year, but would return to profit by cutting costs and focusing on higher end devices. .

“We have to be in the competitive landscape in the next stage and be ready for that evolution,” he said.

Sony intends to tap into its vast archive of music and films, network services and technology to compete.

“By combining these assets well we can come up with uniquely Sony products,” added Hirai.