Sony Plans Cost Cuts Of $250 Mln At Its Pictures Segment

(RTTNews) - Japanese consumer electronics giant Sony Corp. (SON.L, SNE) said Thursday that it is in the process of cutting costs by $250 million at its pictures segment and expects the plan to be fully implemented over a period of more than two years.

The company said that it expects the $250 million in overhead and procurement savings at its pictures segment to be fully implemented by the fiscal year ending March 31, 2016. According to media reports earlier in the week, Sony has hired Bain & Co. to identify more than $100 million in entertainment expense reductions.

At the company's Entertainment Investor Day on Thursday, Sony announced financial targets for its Pictures and Music segments, and compound annual growth rate or CAGR targets for the two segments for the period through the fiscal year ending March 31, 2017. The pictures and music segments are part of Sony's entertainment division.

Accordingly, for the pictures segment, Sony forecasts sales of $8.4 billion and operating income margin of 7.5 percent for the fiscal year ending March 31, 2015. The company also projects segment sales on a CAGR basis for the period through the fiscal year ending March 31, 2017 to increase in the low to mid-single digits.

For the music segment, Sony forecasts sales of $4.8 billion and operating income margin of 9.5 percent for the fiscal year ending March 31, 2015. The company forecasts segment sales on a CAGR basis for the period through the fiscal year ending March 31, 2017 to be flat to slightly up from the prior year.

In August, Sony rejected activist hedge fund manager Daniel Loeb's proposal to spin-off or sell part of its entertainment division, which comprises the movie and music businesses. Loeb's U.S-based hedge fund Third Point LLC had proposed to publicly list a minority 15 to 20 percent stake in Sony Entertainment through a rights offering that will be backstopped by Third Point.

Sony is the maker of the PlayStation game console, Xperia smartphones and Bravia television sets. Third Point is one of Sony's largest investors, holding a stake of about 7 percent in the company.

In early November, Sony reported a wider loss for the second quarter and lowered its full year forecast.

Net loss attributable to the company's stockholders for the quarter widened to 19.3 billion yen or 18.91 yen per share from 15.5 billion yen or 15.41 yen per share in the previous-year quarter. Sales and operating revenue increased 11 percent to 1.776 trillion yen from 1.605 trillion yen in the prior year, amid favorable currency impact and increased sales of smartphones.

The Pictures segment sales for the second quarter rose 9 percent to 177.8 billion yen, benefiting from positive currency impact. On a U.S. dollar basis, sales dropped as a result of lower television licensing, home entertainment and theatrical revenues. Operating loss for the segment was 17.8 billion yen, compared to operating income of 7.9 billion yen in the prior-year period.

Meanwhile, Music segment sales for the quarter increased 16 percent to 115.0 billion yen. Operating income rose 24 percent to 9.7 billion yen.

SNE closed Thursday's regular trading session at $18.65, up $0.12 or 0.65 percent on a volume of 6.63 million shares. In after-hours, the stock further gained $0.15 or 0.80 percent to $18.80.