Sony CEO Howard Stringer Sees 16% Pay Cut
Sony CEO Howard Stringer Sees 16% Pay Cut

TOKYO - Sony announced net losses of 159 billion yen ($2.04 billion) for the third quarter, while Sir Howard Stringer defended his record as CEO as he handed over the reins to Kazuo Hirai.

The end of year period should be the company's best quarter but the floods in Thailand in Oct., the continuing strong yen and weakening global demand, all took their toll as sales fell 17.4 percent versus the same period in 2010, to 1.8 trillion yen ($23 billion).

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"Several production facilities in Thailand suffered direct damage during the floods and supply chains across the region were disrupted," said chief financial officer Masaru Kato.

Sony recorded net income of 72.3 billion yen for the same quarter in 2010.

Sony Pictures managed to increase sales by 7.7% to $2.06 billion, but profits from the division fell by 85 percent to $9 million, which the company attributed to higher marketing costs due to a large slate of theatrical releases. The underperformance of Arthur Christmas was cited as a drag on earnings, while higher revenues from U.S. and Indian networks contributed to overall earnings.

"Consumer products & services" - the television, consumer electronics and games division under the leadership of CEO-in-waiting Hirai - saw a fall in sales of 24.4 percent to $12.77 billion and red ink of over $1 billion dollars after recording a profit in the previous corresponding quarter.

Sony managed to shift 6.5 million PlayStation 3 units in the quarter following a price cut, but game earnings fell nearly 10 percent, while LCD TV sales were down a whopping 43 percent to just over $3 billion.

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Music sales fell 12.2 percent for the quarter, with albums by Adele (21 and Live at the Royal Albert Hall), Susan Boyle (Someone to Watch Over Me) and music from Glee.

Although Sony has managed to become "dollar neutral" -- falls in the value of the greenback no longer hurt revenues -- the weak Euro and other currencies caused an impact of 108 billion yen.

Questions were unusually thin on the ground at the end of the earnings announcement in Tokyo as the assembled media was impatient to get to the appearance of Stringer and his successor Hirai.

Stringer launched straight into the succession issue, explaining how he had been working on it since 2009.

"Great companies do it smart and do it early. Why now? Because he's ready. The stage is set for the recovery," said Stringer, who went on to defend his record after some questions suggesting he`d failed to turn Sony around.

"Twice we were on the verge of profitability when we were hit by the Lehman shock in 2009 and then the disasters last year," suggested Stringer.

"Disasters have been inflicted on us rather than by us. If it weren't for those natural and unnatural disasters, we'd be sitting here announcing black ink and not red," continued Stringer. "2011 was one of the most challenging times in Sony's history, and certainly mine."

"It's a huge responsibility and it's a very tough situation that I'm taking over," said Hirai, before emphasizing that innovation will be central and crucial to Sony's successful future.

A defiant, if somewhat defensive, Stringer had the last word at the end of the Q&A session.

"Sony, like Japan, is in a very difficult situation but we've come back before and we'll do it again. Don't bet against us."

Later in the day, on a U.S. investor call, Sony executives were asked about the importance of the conglomerate's content assets.

They "have never been more relevant to our strategy," said Rob Wiesenthal, executive vp and CFO, Sony Corp. of America. Sony is really the only company that can provide early, consistent content to consumers via electronic devices, he added. That is "a great way to differentiate" Sony's products, he said, highlighting that the likes of Hulu and Netflix spend hundreds of millions of dollars on content.

Asked about Sony Music, Wiesenthal said its creative leadership has been "fortified" under new boss Doug Morris. He said Sony expects "great financial results from that group in the months to come."

Georg Szalai in New York contributed to this report.