Sony Corp. share price down, warns of a $2.1-billion full-year loss after smartphone unit write-down

Sony Corp. made an official statement today and warned it would report a larger than initially expected full-year loss because it was writing down the value of its underperforming smartphone business.

The companys decision was commented for Bloomberg by Masahiko Ishino, an analyst at Advanced Research Japan Co.: “Sony should have done it earlier. A lot of people were questioning why it didn’t write down the mobile goodwill earlier as the business hasn’t been doing well since the beginning of the fiscal year.”

According to Sonys statement, the company is taking a ¥180-billion ($1.7 billion) writedown in the value of its phone business because of fierce rivalry in the market. Sony also announced that it will not pay an annual dividend for the first time since it was listed in 1958.

The Japan-based electronic manufacturer, which has a market value of $21 billion, revealed that it expects a net loss of ¥230 billion ($2.15 billion) for the year ending March 2015. In comparison, the company had previously projected a ¥50 billion full-year loss.

Sony sharply reduced its annual smartphone sales forecast in July to 43 million units after its mobile-phone division reported an operating loss in the quarter from April to June.

Sony said that a “competitive environment” had forced it to revalue the division and revealed it will adopt a new strategy in order to narrow risks and help the company generate stable profits instead of focusing primarily on sales growth.

“Under the new mid-range plan, the overarching strategy for the mobile communications segment has been revised to reduce risk and volatility, and to deliver more stable profits,” the company said in a press release, which was cited by the Financial Times. “This revision includes changing the strategy of the mobile communications segment in certain geographical areas, concentrating on its premium line-up, and reducing the number of models in its mid-range line-up.”

Sony Corp. fell by 1.83% in Tokyo on Wednesday to close at ¥2 123.5 per share, marking a one-year change of +0.40%. The company is valued at ¥2.27 trillion. According to the Financial Times, the 17 analysts offering 12-month price targets for Sony Corp. have a median target of ¥2 000, with a high estimate of ¥3 000 and a low estimate of ¥1 400. The median estimate represents a -7.54% decrease from the previous close of ¥2 163.

Shares in Germany headed for their biggest drop in more than fiver years, having plummeted by 12.17% to €13.70 by 11:06 GMT in Frankfurt.