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Fall into operating red of Sony, Toshiba marks ripple of financial crisis expanding from auto to electronics industry

1, 30. 2009

   The consolidated account settlement of Sony Corp. for the term ending in March 2009 is forecast to fall into the operating red in the profit-and-loss account for the first time in 14 years since the term ending in March 1995. Toshiba Corp., too, is expected to leave a large red figure in the range of 100 billion yen. In both cases, the main factors are the global demand decline and fast rise in the exchange value of the yen. It is highly likely for other major electronics makers to report deteriorating business performance or downward revision in their earning forecast. The financial crisis that started when the leading U.S. securities company Lehman Brothers went bankrupt in September 2008 first hit the auto industry and now its impact is extending to the electronics industry.

Sales have been sharply slowing down centering on home appliances in the world

   The consolidated operating profit-and-loss of Sony for the term ending in March 2009 has been revised sharply downward from the black figure of 200 billion yen to a large red figure. People in the electronics industry have reported that the sales have sharply slowing down centering on home appliances in the world since last fall when Lehman went bankrupt. This condition seriously hit the liquid crystal television, digital camera and other major electronics divisions of Sony. Concerning the yearend sales season when the demanded usually rises highest in 2008, Ryoji Chubachi, President of Sony, said, "The condition was severe for the sales in general, and they were slower than I had thought in North America and Europe." When the demand can be recovered is entirely unknown.

   Moreover, the exchange value of the yen is fast rising on the foreign exchange market, adversely affecting the profit and loss of the companies. Sony had expected the exchange rate of 100 yen to the dollar for the second half of the fiscal year, but in reality the exchange rate is fluctuating around 90 yen to the dollar. This deals a considerable blow to Sony, which would suffer a loss of 4 billion yen a year if the exchange rate of the yen against the dollar rises 1 yen. The loss due to the rise in the exchange value of the yen alone is likely to amount to 100 billion yen.

   In a different picture, demand is also sharply declining over the world for semiconductors produced for supplies to be used in the production of digital home appliances and automobiles. This causes a serious impact on the business performance of the electronics companies which have semiconductor businesses or semiconductor suppliers in their groups. Toshiba is "suffering from a major loss in its semiconductor business, and the current condition is such that the semiconductor business might not be able to survive," the company's president, Atsutoshi Nishida, said. Toshiba has forecast a black figure of 150 billion yen for its profit and loss for the term ending in March 2009. But the company is now likely to experience a dive into the operating red for the first time in seven years since the declining business hit the IT (information technology) business in the March term of 2002.

Hitachi, too, will register a red figure in the range of 100 billion yen in profit and loss for 2009 March term

   Hitachi, Ltd., too, is expected to incur a loss in the range of 100 billion yen in its consolidated profit and loss for the term ending in March 2009 as Renesas Technology Corp., the leading semiconductor maker in the Hitachi group, is likely to fall sharply into the red. NEC Corp. also is likely to be inescapable from going into the red in its consolidated profit and loss for the first time in three years as its semiconductor subsidiary, NEC Electronics, faces bad business condition.

   The electronics companies will start announcing in the second half of January their account settlements for the third quarter of the current fiscal year. They are expected to unveil downward revisions in their forecasts for business performances in the whole of the fiscal year, making it clearer the damage to the electronics industry as a result of the financial crisis.

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