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Sony's major miss on profit targets

Sony (SNE) held its investor and analyst meeting on November 19th. Tucked among the presentation materials was information about the company's new targets aimed at getting its profits and operating income back to "normal" levels. The problem with the projection is that it is for the fiscal year ending March 31, 2013. Sony only expects a small profit in the 2011 fiscal year, mostly based on sales of its Playstations, TVs and camera hardware.

Sony previously said it would return to "normal" levels of margins in 2011. But reaching that goal has been pushed out by two years. "It's a very realistic plan; there is little flair, but the company has previously set targets it couldn't achieve," said Masaryk Ashing, a Tokyo-based analyst at Mitsubishi UFO Financial Group Inc, according to Bloomberg.

The improvement in Sony's profits is based, to a large extent, on that fact that it fired 20,000 people. It's not likely to be able to do that again, so sales of its TVs, camcorders, PlayStations, and PCs must rise significantly to make up the difference. Sony has not had much success with improved sales of any of these products over the last two years. It will have to hope that the economy improves in order for it to reach its goals -- unless it expects a surge in market share for many of its divisions.

One wild card in Sony's forecasts is its studio business, which relies on the success of hit movies. Just one blockbuster could help create a year of good results for the company, while a fallow period could undermine Sony's new goals.

Sony has developed a habit of disappointing investors. It has been years since it launched a hugely successful product like the Walkman or PS2. Unless it can repeat that sort of progress, its recovery will remain in question.

Douglas A. McIntyre is an editor at 24/7 Wall St.


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