Sony's Slow-Motion Trainwreck: $1.3 Billion Loss

NEW YORK (TheStreet) -- If Sony (SNE) were an American company, it might be well on its way to health by now.

But Sony is a Japanese company and thus can't get out of its own way.

As I wrote in February, CEO Kazuo Hirai has made moves that make sense since he took over in 2012. The problem is that he's been unable to execute on those moves painlessly. The result is the company's assets are draining away as though he'd never made the moves at all.

This week Sony announced a revised earnings estimate for the year ending in March. And the company's inability to move quickly is painfully obvious

Before its first earnings revision in February, Sony was expecting a profit of about $300 million. Now it's looking at a loss of $1.3 billion.

In the latest revision, net losses climbed 20 billion yen, about $200 million. Why? Charges related to its exit from the PC business wound up on this year's books, and it couldn't get out of the disc business fast enough to recover even the cost of its equipment.

This wiped out all the good Hirai was able to do during the year, including his divestment of assets like the Gracenote database.

Hirai has in fact done a lot of good.

PlayStation 4 sales were even bigger than expected, coming in at 7 million units in five months, and the quality of Sony product keeps improving

The company is expanding, as well. Sony is getting into the hot area of grid energy storage and into real estate, based on the idea of a mid-level manager.

Sony also succeeded in getting $200 million in new financing for its movie studio. The idea of a live-action movie based on Mattel's Barbie doll may sound stupid. But with all the money being made through Marvel comic characters, who knows?

Japanese analysts, who know their country better than this American analyst does, are not yet willing to blame Hirai for the company's troubles. Poor corporate governance is being blamed on previous management's slow moves to get out of areas that were failing, like TVs, and to properly react to the move of content to the Internet.

All this seems to reflect a big flaw in Japanese management. When things go sour, managers often don't see it. When they do see it, they can't get out of the way quickly enough. There also seems to be nothing anyone can do to speed things up.

Even hedge fund manager and activist investor Dan Loeb of Third Point seems to have thrown in the towel.

He became Sony's biggest stockholder last year, urging that it spin off the entertainment assets so they could act on their own.

Loeb backed away after being criticized by actor George Clooney, who was then working on Monuments Men for Sony Pictures -- a film that eventually lost badly at the box office to The Lego Movie. Loeb no longer has a significant stake in the company.

Sony remains huge, with some strong assets. But its past weakness is sinking it. There seems nothing Hirai can do to stop this slow-motion trainwreck.

Those kinds of films are never good at the box office.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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