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Sony sees record $6.4 billion net loss, to take tax hit

A logo of Sony Corp is pictured at an electronic store in Tokyo April 9, 2012. REUTERS/Yuriko Nakao

(Reuters) – Sony Corp forecast a record $6.4 billion net loss for the

business year just ended, double earlier forecasts and a fourth straight year of losses, inflated by writing off deferred tax

assets in the United States.

A logo of

Sony Corp is pictured at an electronic store in Tokyo April 9, 2012. REUTERS/Yuriko Nakao

In a bid to ease investor concerns over its deteriorating bottom line, the Japanese consumer

electronics giant said it would bounce back this year and make an operating profit of 180 billion yen.

Sony, which

plans to axe 10,000 jobs – around 6 percent of its global workforce – according to media reports this week, has been hammered

by weak demand for its televisions and been overtaken by more innovative gadget rivals such as Apple Inc and Samsung

Electronics.

Kazuo Hirai, who took over as CEO this month, has said he is prepared to take “painful steps” to revive

the company and would not hesitate to scale back or withdraw from businesses if they were not competitive.

The Sony

veteran, known for reviving the PlayStation gaming operations through aggressive cost-cutting, has promised to get the

struggling TV business – which has lost $10 billion alone in 10 years – back on its feet within two

years.

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GRAPHIC: Sony earnings r.reuters.com/vah46s

GRAPHIC: Sony staff details r.reuters.com/kam57s

SPECIAL REPORT: The Sony Schism

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BREAKINGVIEWS-Sony resets ahead of reboot

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Sony forecast a 520 billion yen

($6.4 billion) net loss for the year to end-March 2012. In February it had forecast an annual net loss of 220 billion yen.

The additional loss is from write-offs of tax credits in the United States, which the company cannot use because of the

losses it has racked up.

Analysts had forecast a full-year loss of 214 billion yen, according to Thomson Reuters

I/B/E/S.

“To bring Sony back, Hirai needs to develop personnel and platforms that create competitive and innovative

products, but that will be a formative task after a lot of talent left under early retirement plans,” said Tetsuru Ii,

president of Commons Asset Management, who oversees about 2.7 billion yen worth of assets and does not hold a stake in

Sony.

“The old Sony culture would only allow it to make things that were the best globally. Under that logic, does it

make sense for Sony to continue its TV business, when it’s not even the market leader in Japan?

“In terms of management philosophy, (Hirai) will have to choose

and focus the company’s business activities.”

REKINDLING THE FLAME?

Some analysts believe Hirai, a fluent

English speaker, can rekindle the Sony flame, saying he has a good grasp of the business and is likely to know how to break

down its silos and integrate its divisions.

A key concept in Hirai’s strategy hinges on merging Sony’s robust roster

of entertainment properties – including singers Kelly Clarkson and Michael Jackson, and the “Spider-Man” and “Men in Black”

film franchises – with its Vaio, Bravia and other electronics brands, in an effort to boost sales.

He has said the TV

business would be crucial to this “convergence” strategy, brushing aside suggestions it may need to pull out of the

market.

Recently, Sony exited an LCD panel venture with Samsung, enabling it to obtain screens for its TVs more

cheaply. It also agreed to buy out Ericsson’s half of their smartphone venture for $1.5 billion to shore up its position in

a market where Apple and Samsung have become leaders.

Hirai, who was promoted from head of Sony’s consumer products

and services businesses that produce the bulk of Sony’s $85 billion in annual sales, has also singled out medical as a

potential core business for the future.

Sony shares closed down 3.5 percent ahead of the announcement on Tuesday, its

biggest one-day drop in three weeks. The benchmark Nikkei average ended around 0.1 percent lower. The

stock has almost halved since little more than a year ago, and has dropped 11 percent in the past 10 trading

sessions.

The annual results are due on May 21.

($1 = 81.3900 Japanese yen)

(Additional reporting by Mayumi Negishi; Writing by Ian Geoghegan; Editing by Edwina Gibbs and Alex Richardson)

(This

story corrects Nikkei close in the penultimate paragraph)