The Sony revision wasn't completely unexpected. The company had based its earlier forecasts on the assumption that exchange rates would be 105 yen per dollar and 160-165 yen for every euro. Normally, Sony hedges against the risk of unfavorable currency swings. But the yen's unpredictably wrenching move appears to have caught the company off-guard. As the financial crisis played out over the past few weeks, the dollar and euro have weakened against the yen. Late on Oct. 23, the dollar was trading at around 98 yen and the euro at 125 yen, down significantly from around 109 yen and 147 yen, respectively, in early September. The yen's gains create a problem for a company like Sony, which made nearly three-quarters of its revenues outside Japan. Those revenues get converted back to yen when the company closes its books at yearend.

And even after Sony tweaked its forecasts, officials didn't rule out the possibility of another downward revision. The new targets are only attainable if the yen weakens to around 100 yen per dollar and 140 yen per euro, Oneda said. "Keeping all other factors constant, if the currencies stay where they are, it could reduce operating profit by an additional 80 billion yen to 90 billion yen ($820 million to $920 million)," Oneda said.
Bleak Horizon

Faced with the prospect of a global slowdown, Sony is bracing for lower yearend holiday sales in Europe, the U.S., and China. It trimmed sales forecasts for some of its most popular products, by 9% for Handycam video cameras, 8% for Cybershot digital cameras, and 6% for Bravia flat-screen TVs from earlier projections. Competition is also driving down prices faster, Oneda said. Sony's electronics business accounts for 70% of overall sales so the cuts will dent earnings. Plunging share prices will hurt Sony, too, because its insurance and banking unit invests heavily in stocks and bonds.

The only good news from the day's press conference, held at a hotel in downtown Tokyo, was that sales of the PlayStation 3 and PlayStation Portable video game consoles are likely to be as strong as—or possibly even better than—earlier projections (10 million PS3s and 16 million PSPs for the fiscal year), thanks to a redesigned PSP and an array of new online services aimed at the PS3.

Perhaps the toughest part for Sony's management came during the question-and-answer period. Asked whether the company could manage a turnaround of the money-losing TV and video game businesses this year, as Stringer had promised in late June, Oneda said: "It's looking doubtful." TVs have been hemorrhaging money since the fiscal year through March 2005, and games since March 2007. "In my personal opinion, next year could be another difficult one for us," Oneda added.