索尼 (SONY) 2009 Q3 法說會逐字稿

Good day, and welcome to the Sony Corporation third quarter fiscal year 2009 financial results conference call.

At this time, all participants are in a listen-only mode.

We will conduct a question and answer session towards the end of the conference.

(operator instructions)

I will now turn the call over to your host, for today, Mr.

Sam Levenson, Senior Vice President of Investor Relations at Sony Corporation of America.

Please proceed.

Thank you very much for that introduction, Nikita.

Good evening from Tokyo, and thank you all for joining us today, February 4, 2010, for the discussion of Sony's third quarter results.

I am Sam Levenson, Senior Vice President Investor Relations at Sony Corporation of America, and with me on the conference call tonight is Nick Oneda, Executive Deputy President and CFO of Sony Corporation, Mark Kato, Deputy CFO Sony Corporation, Rob Wiesenthal, Group Executive Corporate Development and M&A for Sony and EVP and CFO of Sony Corporation of America, and Gen Tsuchikawa, Senior General Manager of the Investor Relations division.

Thank you all very much for joining us.

In just a few moments, we will review today's announcement, and then we'll be available to answer your questions.

Please be aware that statements made during the following remarks and Q&A session with respect to Sony's current plans, estimates, strategies, press release and other statements that are not historical facts are forward-looking statements about the future performance of Sony.

These statements are based on management's assumptions in light of the information currently available to it, and therefore, you should not place undue reliance on them.

Sony cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements.

For additional information as to risks and uncertainties, as well as other factors that could cause actual results to differ, please refer to today's press release, which can be accessed by visiting www.sony.net/ir.

With that, I'm now going to turn to today's announcement.

I'll begin by briefly summarizing the financial results and other key developments during the past quarter.

We'll also touch upon the key questions raised earlier today when we hosted our regular earnings press conference and investor meetings here in Tokyo.

Let me remind you that a webcast replay of the investor meeting, along with the slides presented at that meeting, and our detailed earnings release, are available on our website for your access.

During the third quarter, the Company continued to successfully execute on each of its major initiatives, and operating profit for the quarter substantially exceeded our plan, as announced in October.

Excluding restructuring charges and equity in affiliates, our operating profit for the third quarter was JPY165.5 billion, as compared with JPY4.8 billion in the third quarter of last year.

All of the Company segments, except All Other, recorded improved operating results year-over-year.

Due to the better than foreceasted results, and after review of our outlook for the balance of the fiscal year, we have again upwardly revised our full year outlook for operating loss from JPY60 billion to JPY30 billion.

This JPY30 billion improvement is comprised of JPY25 billion improvement in the Consumer Products and Devices segment, JPY25 billion improvement in the Financial Services segment, a JPY10 billion decrease in the forecast in the B2B & Disc Manufacturing segment, and a JPY5 billion decrease in each of the Pictures and NPS segments.

During the quarter, we continued to make significant progress in substantially reducing inventories and timely managing receivables and payables.

As a result, our cash flows continued to improve.

We are very pleased to share with you that Sony expects positive cash flow from operating and investing activities combined, excluding the Financial Services segment's activities.

With respect to the structural transformation process that we initiated earlier this year, we continue to make progress there as well.

We remain confident that we will achieve the targeted JPY330 billion in annual cost savings, and we remain on track to achieve a 20% reduction in procurement costs as compared with 2008 levels.

Our process of consolidating manufacturing facilities is running well ahead of plan.

As a reminder, we started the year with 57 plants, and a goal of reducing them by 10%, or six plants.

By May 2010, we anticipate a reduction of 12 plants, twice our initial target, as we've identified additional opportunities to shrink our operations.

So to put it simply, we are either on plan or ahead of plan for each of our key strategic initiatives.

Before we turn to your questions, let me briefly discuss a few developments in each of our key businesses during the quarter.

In the Consumer Products and Devices segment, sales decreased 11%, driven largely by price declines in TVs, System LSI, and Optical pickups.

However, due to aggressive cost reduction, an improved cost of sales ratio, and the positive impact of exchange rates, operating income improved JPY69 billion year-over-year.

Of particular note this quarter was that the TV business achieved profitability.

In the Network Products and Services segment, we recorded a slight increase in sales year-over-year.

Operating income improved to JPY19 billion as compared with a JPY6 billion operating loss in the same quarter last year, primarily due to improvements in the VAIO business.

In the Game business, operating income of approximately JPY15 billion was recorded, which is roughly flat with the prior year period.

While Game sales declined 4%, we were able to offset that through lower manufacturing costs and SG&A.

PS3 hardware unit sales increased 44%, to 6.5 million units in the quarter.

Year to date, we've sold 10.7 million units of PS3, and we remain on track to achieve our goal of 13 million units.

For the quarter, both PSP and PS2 recorded lower unit sales as compared with the prior year period.

For the year, PS2 unit sales are expected to exceed our prior estimate, and PSP unit sales are expected to fall short of our prior estimate.

In the B2B & Disc Manufacturing business, increased sales of Blu-ray drove an increase in the Disc Manufacturing business.

However, this was more than offset by declines in the B2B business.

As a result, sales for the segment decreased 1%.

However, operating profit rose 21%, to over JPY10 billion, primarily as a result of the higher Disc Manufacturing sales.

In the Pictures segment, higher theatrical, home entertainment and television revenues drove sales up by 16%.

On a US dollar basis, sales rose 25%.

The quarter benefited from the strong theatrical performances of "2012" and the Michael Jackson movie, "This is It", as well as significant sales in home entertainment of "Angels and Demons" and "Terminator Salvation".

Operating income rose 9%, as the benefits from increased sales were partially offset by the theatrical underperformance of one title, and the write-off of certain development costs.

The Music segment also benefited from the Michael Jackson movie soundtrack, as well as the breakout performance of the first Susan Boyle album.

Sales rose 2%, and operating income rose 8%, as the Company benefited from aggressive cost reduction and lower restructuring charges.

Finally, the results of the Financial Services segment were quite strong.

Revenue doubled year-over-year, due to an increase at Sony Life.

Operating income of JPY35 billion was recorded, as compared with an operating loss of JPY37 billion in the same quarter of the previous fiscal year.

In this year's quarter, the Japanese stock market rose 4%, whereas in last year's quarter, it fell 21%.

This had a positive effect on our results, as we mark to market certain securities in the portfolio at Sony Life.

In summary, as was the case in the second quarter, the most significant upside to our earnings forecast for the year comes from the Consumer Products and Devices, and from the Financial Services.

While the forecast of loss for the year has improved from our initial estimate of JPY110 billion loss back in May last year, to a JPY30 billion loss today, we will continue to try and achieve breakeven operating results this year.

With that, we will be happy to take your questions.

(Operator instructions) Our first question comes from the line of Daniel Ernst with Hudson Square Research.

Please proceed.

Yes, good evening -- good morning.

Thanks for taking the call.

Two sets of questions.

First, on the PlayStation group.

On the last call, I believe you said you were operating at around a 10% negative margin on PS3 units, and I wanted to know where that trended now, and where you'd like that to get to by the end of the year, assuming prices stay where they are, and I assume you're working on cost reductions.

And then also on the PlayStation business, you had a 44% increase in PS3 unit sales, but only a 17% increase in PS3 software unit sales, indicating a lower attach rate for games.

And I wanted to know what you thought contributed to that, and what your outlook is going forward now that the PlayStation installed base is certainly growing, but maybe the software isn't.

And I have a follow-up question on the TV business.

Oh, this is Nick Oneda.

I will answer the first question.

Currently, we are expecting the negative margin for the PS3 would be around 5% or 6%, so -- which is on target basis.

And then sometime in next year, it will be the positive, you know, the margin from the PS3 hardware.

Because of, we are expecting that we are going to use the 45-nano (inaudible), you know, the -- what do you call them, the [key] devices.

And that will help to reduce the cost for other materials too.

That is the main -- the reason of the positive margins for the next year.

So this is the first answer, to the first of your questions, and what is the -- [material (inaudible) this quarter, the tie ratio].

I think that the PS3 unit sales is -- tie ratio-wise, it is not so bad as we originally expected.

The tie ratio is about now, the -- PS3, right?

PS3 is about 7.8.

And so far, the PS2 is about 10.5 or 10.6.

But concerning the timeframe, since that we introduce the product, 7.6 tie ratio is not so bad year.

Okay, it's a long tale.

And then, on the TV business, you had a slight profit in TVs in the quarter, I think the first time in some time.

And I wanted to know what you thought contributed to that, and then, looking ahead, do you think that that's sustainable, and more importantly, can you start to actually grow profits in TVs?

The third quarter is one of the -- the reasons of the profit operation for the third quarter is that the seasonality-wise, that is the highest quantity of sales season.

Out of the expected 15 million units, we sold about 5.4 million sets within the third quarter.

So usually the third quarter shows the better numbers because of the quantity increases.

That is number one.

But the -- another thing is the price itself.

We expected some deterioration during the third quarter, but fortunately, that deterioration was not so big as we originally expected.

That's the second thing.

The third thing is our cost reduction effort, particularly for the fixed cost expenses, was positively impacted to our bottom number, particularly for the TV businesses.

And also, the price, the cost reduction of the material, is on schedule -- maybe a little bit ahead of that.

So for those reasons, the our profitability of the TV was good in quarter three.

Is it sustainable or not?

The next fiscal year, next quarter, we are taking some -- the negative number, because of the fourth quarter is usually the less quantity.

And also, we are taking some conservative positions in terms of the price deteriorations, because of we didn't expect -- we didn't see any big price reductions within third quarter, but we are still taking some cautious position that the fourth quarter, price deterioration might happen.

So maybe the fourth quarter is a negative number, but the coming fiscal year, we are expecting that the year would be a profitable operation, because we expect more quantity in the next year, compared to this year, which is about the 20 million plus numbers next year.

That will help.

And also, our products, the competitiveness, is better than last year, fiscal '09, because we're going to introduce more LED backlight products.

Last year, we only have 4% of our total products has the LED backlight products.

And we will also increase the 3D quantities, probably around 10% for next year.

And we also increased the IPTV, the function TVs for next year.

So there are many improvements to the products' competitiveness in the next year.

So we are hoping that next year could be some profit from the TV business, next year.

Okay, thank you for the color, but -- this is the last question.

In the restructuring, I think from the 2004 or 2005 period, in addition to -- among many things you did in cost reduction efforts, and you just did the plant closures, you also had a target SKU count reduction.

And if you look across the competitive landscape of electronics, successful firms, although smaller, like Apple, who are growing fast, have much fewer product SKUs.

Samsung seems to have fewer and fewer product SKUs every year.

What are your current thoughts on SKU count reduction or not -- is today?

We don't have any drastic reduction of the SKUs for the next year.

But one thing that I can clearly say is that the SKUs for the telephone will be drastically reduced for the coming fiscal year.

But not so much for other products at this moment.

Understood.

Thank you very much.

Our next question comes from the line of Yuji Fujimori with Barclays Capital.

Please proceed.

Hello.

Thank you very much for taking my questions.

First of all, let me ask about the inventory conditions.

Supplies to inventory were well managed at the end of Q3.

How, exactly, did you cut the inventories?

Could you explain with more details?

And secondly, could you explain about the progress of cash conversion improvement projects, I guess starting from last summer?

And also, secondly, in terms of TV operation, could you give us a guidance of the TV operating losses for -- on a full year basis?

Please give me the exact range of the amount.

And also, finally, it looks like the Q3, TV improved by JPY48 billion.

And in order to get better sense for next year's -- this business, if you can give us some kind of breakdown, such as fixed cost reduction, or marginal profit rates and improvement, that kind of breakdown, if you have, it's very helpful for us.

Okay.

Your first question is the inventory control.

Basically, we didn't change any systems.

We didn't change any processes.

What we did was taking the leadership by the top management, including myself, and also Nakagawa-san, who is responsible for the manufacturing, the operations and the supply chain operations.

We are pushing the operational people to watch for the inventory very carefully, and then do not buy any excess materials, or do not pile up the inventories more than what we requested, what we ordered.

This is the kind of management, the strong directions, that brought this inventory level drastically.

Of course, for the next step, we really have to review the overall system improvement, and then reduce the overall supply chain more systematically.

But so far, during the last several months, we are successful, more -- how to say this -- strong direction from the top management.

That is the reason why we could reduce inventory this fiscal year.

And the cash -- the conversion improvement project, of course, one of the important things is the inventory, in our case, because we have a very big inventory for the beginning of this fiscal year.

And the second thing is, our payment term is usually faster than our collection -- I mean, the accounts receivable collection timing.

So we are now negotiating with our suppliers, and after this, the collection timing and the payment timing should be equal, or possibly that the payments could be longer than the collections and the receivable collection time.

And also, we are pushing the operating units to review the investment, and to -- not to buy any unnecessary -- I don't say unnecessary, but you know, to generally carefully watch the need of the investment.

And those are the main actions that we are doing for the improvement of the cash conversion cycle.

Your third question is the full year TV losses.

We are still losing money because of the -- particularly, the first half, we lost big money, and as we -- third quarter, even though we did successfully achieve the profit number, but we are taking some reasonably conservative positions for the fourth quarter.

So the guidance is still the '09 full year basis, TV is still a loss situation.

And --

The previous guidance was, I guess JPY80 billion to JPY90 billion losses on a full year basis.

So the CPD segment was revised up by JPY25 billion.

Is that the most (inaudible) operation?

Yes, I think that the latest forecast is somewhere around the JPY500 oku yen, is our loss of the TV business.

I said the last time, it's probably JPY700 oku or JPY800 oku yen.

But because of the third quarter improvement, I think that that loss could be reduced by JPY300 oku yen compared to the last time.

Right, thank you.

Fujimori-san, this is Tsuchikawa.

Just to correct what you said, the JPY45 billion improvement in Q3 is not just TV, but it's the whole Consumer Products division.

Sure.

Sure.

Right.

And the Q3 improvement factor is compared the October forecast is coming from the -- one is the price of the television was not so severe compared to our plan.

Number two is the fixed cost reduction effort, and the material cost down, was done successfully.

I think those are the main reasons of the improvements in the third quarter TV business.

Okay.

Our next question comes from the line of Jessica Cohen with Bank of America-Merrill Lynch.

Please proceed.

Thank you.

I have a couple of questions on the entertainment side.

First of all, in Home Video, the trend seemed better in this past quarter, the calendar Q4.

And I was just wondering if you could talk about how much do you think the problems in the last year or so have been secular, how much is cyclical, and -- well, let's start with that one.

Okay, it's Rob Wiesenthal speaking.

I think you're right.

We are seeing definitely signs of stabilization and improvement in Home Video over the fourth quarter.

It was very difficult, as you can imagine, last year, to disaggregate the impact of piracy versus shifting consumer tastes and the economy.

So I guess I would say that, clearly, part of it was the economy, and I think that's what we're seeing in terms of the stabilization, and also, I think the pickup of Blu-ray and the dedication of retail, of shelf space for Blu-ray, and the proliferation of lower cost Blu-ray players has really helped that.

Overall, we are performing better than the rest of the home entertainment industry year-over-year.

Retail is about down 6% in terms of units, 6%, 7%, and we're probably about 2.9%, and that's been through promotion, and mining the catalog, and having a lot of new, strong releases like "Pineapple Express" and "Paul Blart" and others.

But I think you're right, Jessica, we're definitely seeing some stabilization here in retail and sell-through.

And then as you look out, Rob, how big do you think Blu-ray will be of total, either for you or for the industry?

And can you talk about what your expectations are for video on demand?

I mean, it seems like there is a bigger focus by the industry, finally.

The window seems to be moving up a bit.

Is there something that's exciting to you?

Do you think there's marketing support behind the cable operators?

Just to follow-up on the Home Video question, just one more thing.

In addition to those other titles, "Angels and Demons" was a very big part of that.

In terms of Blu-Ray, it's still only about 6% of transactions, and about 8% of overall value.

Again, I think as these -- obviously, there was some -- you know, we've been feeling the impact of the economy in terms of purchasing behavior, but as these players continue to proliferate, we continue to have high expectations for Blu-ray.

With respect to video on demand, there's a lot of experimentation going on in the industry in terms of looking at windows, looking at alternative forms of distribution, both in terms of cable, and also direct-to-TV IPTV.

We did our second venture into testing of straight IPTV titles with "Cloudy With a Chance of Meatballs", which was directly to Bravia Internet-linked TVs, which was successful.

We would like to see the same thing on cable.

You obviously need to get the FTC waiver taken care of, to block the digital -- the analog out on a television set, but we'd like as much of this to happen across all platforms.

So not only direct IPTV, cable, but also through PlayStation and other types of platforms.

The cable operators are, and satellite operators, are willing to give support to this type of -- these services, and there have been -- they've been pretty constructive.

And I think you're going to see a lot more aggressive experimentation over the next year by everybody.

Right.

And I have one last question on Music.

Can you break out how much -- you know, was the improvement due to lower restructuring costs?

Can you just break out what was restructuring in the quarter?

I'm sorry, Jessica.

Can you repeat the question?

Was the improvement in operating income due to lower restructuring costs?

Can you give us what restructuring costs were in the quarter?

And then, any kind of outlook you can give on both Music and Film would be great.

Okay.

In terms of Music, I mean I think a lot of it is captured by the press release.

A lot of it really was on the sales side.

With Susan Boyle, about 8 million units in the quarter, and Michael Jackson, in terms of "This is It", about 4.2 million.

There was very little recorded during this quarter in terms of restructuring.

I think that we're seeing the benefits of restructuring in the past really come to the bottom line, in terms of maintaining our very, very strong margin.

We have been very much ahead of the curve at our music company in terms of right-sizing our platform for the current environment.

And luckily, we've had a lot of hits to go along with it, so we feel like we're in pretty good shape there.

Okay, thank you.

Our next question comes from the line of Kota Ezawa with Citigroup.

Please proceed.

Hi, good evening.

I've got two questions, the first one, a question regarding the third quarter actual operating profit, which was pretty high.

You mentioned in the briefing in Tokyo, the third quarter operating profit exceeded internal budget by JPY100 billion.

Inside of this JPY100 billion, you mentioned JPY45 billion in CPD, JPY15 billion in NPS, JPY10 billion in Entertainment, JPY15 billion in Financials, and perhaps JPY15 billion in others.

And the question is actually, then, how big an amount in this JPY100 billion we can regard as a continuous effect in the future?

As JPY45 billion in the CPD is mainly by TV pricing, so we shouldn't regard all the JPY45 billion is continuous in the coming future.

And the Financial and Entertainment, Music, I think the portion is mainly temporary improvement, so not continuous.

Is this right, what I'm thinking, or should we think those are partially continuous?

This is the first question.

We have one -- just a clarification, Jessica, if you're still on the line.

In terms of the retail industry being down about 6.6%, this is true.

We were in fact up 2.9%, not down 2.9%, so please accept that correction.

My apologies.

Sorry Nick.

Q3, of course, as I said, that is JPY1,000 oku yen ahead of our forecast, which was made in October.

But this is also the timing issues, too.

As I mentioned, the fourth quarter, we are taking some cautious -- the conservative positions, that JPY1,000 oku yen will be offset partially in the fourth quarter.

One of the main reasons is the price deterioration that we expected in third quarter was not actually happened, so we are still anticipating or expecting that the price deterioration might happen in the fourth quarter.

And the other thing we are thinking is, we are cutting the advertising and promotion expenses for the third quarter, or even the first quarter, last half of this fiscal year.

But because of the new products' introduction for the spring time, we'd like to spend some additional marketing and advertisement expenses within the fourth quarter.

So therefore, the JPY1,000 oku yen, JPY100 billion effect will not continue for the coming fourth quarter.

Okay.

And can we regard, even partially, in this JPY100 billion, thanks to our fixed cost cut, or profit structure change, and then we can think the profit may be (Mulitple Speakers)

Yes.

Yes.

And that will (multiple speakers) it in the future?

Yes.

Yes.

The price deterioration is one factor.

The other factor is, of course, the cost cutting effort for the transformation.

And then, of course, the material cost reduction, which we are expecting 20% in reduction within this fiscal year.

Those kind of things is actually contributing the profitability over the third quarter, yes.

Okay.

My second question is, for the operating profit view on the fourth quarter and the full year, March 2010.

You mentioned in the briefing that internal operating profit target is breakeven, rather than minus JPY30 billion, you mentioned today, (multiple speakers).

Right.

Could you answer, which business can show better margin to realize this breakeven?

And what's the reason behind?

I believe TV is promising to show another bit in the fourth quarter, but if there's any other business or issue, I'd like to hear about it.

Thanks.

Well, generally speaking, the Electronics, the segment, it probably had some challenge to improve the profitability, compared to the official announcement of the JPY300 oku yen deficit.

The main reason is, we are not actually -- we are not sure whether the price deterioration may happen for the fourth quarter or not.

So this will be -- will impact here JPY200 oku yen, JPY300 oku yenmillion.

And if that happens, if the prior deterioration did not happen, we would be very close to the breakeven.

So main -- or the opportunity comes from the Electronics businesses.

Do you mean that this is -- this JPY30 billion, or JPY300 oku yen difference, is mainly almost all about TV pricing situation?

Or is there any other issues?

Yes, the -- out of JPY300 oku yen, a little -- JPY100 oku price deterioration comes from the TV.

And others is from the video cameras, you know, the other -- the Electronics segment.

Electronics product is also -- we are considering some price deterioration for the fourth quarter.

Okay, this is great.

Thank you very much, and congratulations for the good numbers for the third quarter.

Thank you.

Thank you very much.

Our next question comes from the line of Jason Mauricio with Arete.

Please proceed.

Hi, thank you very much.

I was wondering if you could go into more detail on the digital still camera business.

You mentioned revenues were down but profitability was up.

And if you could talk through the reasons why revenue was down, whether it's ASP reduction or share loss?

And what were the factors, the reasons that you had that profitability was up?

Thanks.

The sales quantity itself is up, but the price deterioration is bigger than the quantity increase impact.

So profitability-wise, we are better than what we expected -- is a couple of reasons.

One is the fixed cost reduction, and also, the second thing is, we are using the more -- how to say -- outsourcing, you know, resources for the assembly operations.

So those are the main reasons, and also, the same as the TV operation, the price deterioration was not so bad, compared to what we expected.

And on video cameras, is it a matter of waiting for the new models to come to market before profitability can improve?

Or are we seeing some structural issues there that are separate from cameras, given profitability did not improve?

Yes.

In the case of the camcorder, the market itself is -- as you know, it's shrinking.

So therefore, overall, the sales and the absolute number of the profit may be less than previous year.

However, the profitability itself, even though the absolute amount itself may be deteriorating, but the profitability itself, we are still maintaining the same level as before.

So therefore, what we have to do is to increase the market share for the time being, and then the next step is, of course, that we have to do some new product introductions.

Yes.

Okay.

And my final question is on Sony Online Services and PSN, the entirety of your content delivery system.

You spelled out very clearly how you see that as a revenue driver going forward.

However, I was wondering, if from a corporate standpoint, you're looking at these services, whether it's IPTV to the television set, or PlayStation Network content, or video delivery, are these -- can this be a profit center for Sony in the future, or is this a carrot to get consumers to buy your hardware?

We need both, and it's just going to take time.

We've already set forth the strategy of the migration of the PlayStation Network to Sony Online Services, to go across all our platforms.

And obviously, given the competitiveness in the CE business, we are going to need that extra revenue.

It's going to have to be a profitable one, too.

Okay.

Thank you very much.

Our next question comes from the line of Mark Harding with Maxim Group.

Please proceed.

Okay, thank you for taking my question.

Specifically, I wanted to sort of focus on the TV pricing.

You had mentioned that the price erosion was perhaps more benign this quarter.

What gives you confidence, or what makes you think that going into the fourth quarter, prices are going to -- or, price declines are going to accelerate?

I was wondering, both on a -- specifically, I guess, on a regional basis, as well.

Yes, price declining for the fourth quarter is entirely up to the competitors' situations, too.

Of course, we have the reasonably low inventory level, in both the on-hand basis, also the market -- the inventory level too.

So therefore, we don't expect so much the price adjustment within this fiscal year.

And also, our products, the competiveness, is better than the fiscal '09 model, so there is a great chance that we don't have to pay so much -- the cost for the price adjustment.

Okay.

And then, if -- given the fact that the pricing environment was relatively benign, was there anything that perhaps held back market share gains this last quarter on the TV side?

Well, I don't see any big market share increases within this fiscal year.

Around 10%, because we are still shooting for the -- about 15 million sets within this fiscal year.

That is about 10% over the market share, which is about 2.8% or 2.9% below -- lower than the last year.

But next year, because of our new products, the competitiveness, and also we are expanding our business in the developing countries by using the OEM or ODM type operations.

We are trying to sell more than 20 million sets next year.

In this case, our share will be increased.

That's our expectation at this moment.

Okay, great.

And then, I guess also taking a look at the regional demand, when you look out for the rest of 2010, can you give any sense of how you see the demand environment?

What are you -- excuse me, just to understand the question.

When you say regional demand --

Well, looking at US, Europe, Asia, are you seeing any pockets of weakness going forward for the rest of the year?

We have some -- you know, the tough situation in Europe.

And because of the competition with Samsung or LG is taking a very strong position in Europe.

But we are relatively okay for China, for Pan-Asia, with those areas.

So I think that depending upon the areas, it's certainly different, but except for Europe, I don't think any big weakness in other areas.

Okay, fair enough.

And actually, just lastly, if I could.

I know you touched on it on the earlier call.

There was a discussion about anticipated restructuring costs for the upcoming fiscal year.

Can you give us any color around perhaps the restructuring plan for fiscal 2010?

Yes.

We are still in the middle of the restructuring process, which was announced in the fiscal year '09.

Because of the -- some of the shutdown of the plant may continue, even for the fiscal year 2010, and also, some of the people, the reduction is still planned in some of the operating units.

So therefore, the fiscal year 2010, I think at least, the JPY500 oku yen or plus may be required to do the restructuring.

Okay, great.

Thank you very much.

Thanks, Mark.

Nikita, we have time for one last question, please.

Our final question will come from the line of Ben Lu with Seligman Securities.

Hi, thank you, guys, for taking my questions.

Just to follow up on the restructuring, you said at least JPY50 billion for next fiscal year.

My understanding was that this fiscal year's restructuring was focused more on headcount reduction, as well as consolidating some manufacturing plants.

I know you can't go into specific details, but can you give us a sense of what further restructuring is required for next year?

Oh, the next fiscal year?

As I said, that the -- we would need more than JPY500 oku yen or plus.

Usually, 6% of the restructuring cost is coming from the people -- you know, the reductions.

And 40% is usually relating to the machinery, the building, the amortization.

So next year, you still plan to cut more headcount?

Yes, we may have to -- we have to cut some of the employees, yes.

Okay, great.

And then also, I wanted to get a sense of the TV profitability in Q3 by geography.

I know at CES, Howard had said that in November, TV was breakeven here in the US.

I wanted to get a sense of what was profitability across the different geographies?

We don't disclose profitability by region by region basis.

So please excuse me to disclose this profitability by region.

Can you comment on whether all regions for TVs were profitable?

No.

Particularly the high competitive market, we are not making money.

For example, US is one of the typical cases, and also, Europe is the other cases.

So US and Europe did not make money in TVs in Q3?

Oh, Q3.

I was talking about on an annual basis.

Oh, no.

I was referring specifically to Q3, because your TV was profitable in Q3.

Oh, Q3 specific, I don't disclose.

I couldn't disclose.

Ben, we've agreed to disclose whether or not TV and Game are profitable until they get back into a profitable basis for a full year, but we're not going to give quarter by quarter and region by region breakdowns.

Okay, fair enough.

And then also, Oneda-san, based on your comment earlier for TV loss for the fiscal year of about negative JPY50 billion, that would imply that Q4 OP losses of around almost JPY40 billion.

How much of that loss in Q4 that you're assuming comes from lower unit volume scale versus pricing?

Oh, you are comparing the third quarter to fourth quarter?

Yes, because you said earlier that your previous plan for fiscal year TV losses was about negative JPY70 billion, negative JPY80 billion.

Now you think it's going to be more like negative JPY50 billion.

And that would imply the Q4 loss is about negative JPY40 billion.

So I was just curious, how much of that JPY40 billion that you're assuming for Q4 comes from lower unit volume scale, versus lower pricing?

(spoken in Japanese)

Ben, this is Tsuchikawa.

As we mentioned, we've set up roughly JPY20 billion of reserves for the CPD business, and some part of that is TV.

And basically, that's due to potential pricing decreases and others, certainly additional (inaudible) that we may use.

And that's as much as we've disclosed on this issue.

Yes, we can take the detailed questions in the New York office.

We're going to have to end the call there.

Okay, thank you.

So we want to thank everybody for participating tonight, and please feel free to call the New York, London and Tokyo IR teams with any further questions which you may have.

Thank you very much.

This concludes the presentation.

You may now disconnect.

Good day.