The Tokyo, Japan-based multinational business conglomerate, Sony Corp. (TYO:6758) disclosed on Monday that their profits for the year are likely to be less by 10 percent. It was further revealed that this climb-down is because of the recent sale of their battery business. Incidentally, a few months back, in July, Sony had cut their sales forecasts for the full financial year by about 9 percent.
The electronics giant from Japan recently sold off their battery business to Murata Manufacturing (TYO:6981). This in itself was not a new announcement. However, no price was mentioned earlier. A warning was issued, though, which said that revenues are likely to come down because of the agreement.
On Monday, Sony revealed that the company has entered into a binding contract with Murata. 8,500 of their workers are going to be transferred to Murata Manufacturing. This was a loss making division of Sony. The business currently employs 125,300 workers.
First-half results for the year are going to be released on Tuesday.
The Tokyo stock market had already closed when the announcement was made on Monday. During the day’s trading session, the Sony stock was up by 1.9 percent. This year, the stock has gone up by 12 percent.
Operating Profits for the Year is Down
Operating profits are now expected to be 270 billion yen or $2.6 billion for the year. However, it is still 30 billion yen lower than forecasts made earlier this year. Analysts had said that Sony’s earnings in this financial year are likely to be 307.5 billion yen. The expected impairment charges from this sale will be 33 billion yen.
Some analysts, such as the Credit Suisse Group, however, feel that Sony got away for less, as the likely impairment charges should have been around 40 billion yen.
Sony Wants to Focus on Core Business Areas
After deliberating for some time, Sony (TYO:6758) decided to go ahead with the deal because the business wants to now focus on entertainment, camera sensors, and video games, which are all core operations of the company, and profitable too. In recent times, Sony has embarked on a major restructuring drive. Production of camera modules has been affected after the severe earthquakes of last April.
In recent times, the electronic giant’s business has been hit by increasing value of the Japanese yen. Revenues earned from overseas sales have been lower once the money is converted to local currency as a result.