索尼 (SONY) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Sony Corporation Conference Call for Overseas Investors. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I will now turn the call over to Sam Levenson, Senior Vice President, Investor Relations for Sony Corporation of America.

Thank you, Frances. And thank you, all, for joining us today, November 2, 2011, for the discussion of Sony's second quarter results. We hope you enjoyed Tony Bennett's new release on Columbia Records while you were on hold. I'm Sam Levenson, Senior Vice President of Investor Relations at Sony Corporation of America and with me on the conference call tonight is Kazuo Hirai, Representative Corporate Executive Officer and Executive Deputy President; Mark Kato, Chief Financial Officer of Sony Corporation; Robert Wiesenthal, Group Executive, Corporate Development and M&A for Sony and the EVP and CFO of Sony Corp of America; and Yoshinori Hashitani, VP, Senior General Manager, Investor Relations Division of Sony. Thank you all very much for joining us.

In just a few moments we'll review today's announcement as well as discuss our television business and the recently announced acquisition of the remaining interest in Sony-Ericsson. 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. Let me remind you that a webcast replay of the investor meeting held earlier today in Tokyo along with the slides presented at that meeting and our detailed earnings release are available on our website for your access.

With that, I'm now going to turn to today's announcement. During the second quarter we saw a continuation of the market trends seen in the fiscal quarter -- that is a continued strengthening of the yen coupled with an electronics business environment that remains challenging, particularly for TVs in developed markets. The situation was further compounded by the lingering effects of the March earthquake and flooding in Thailand which has impacted both our operations and the supply chain. Simply said, the environment -- both natural and business -- has been difficult.

I'll briefly discuss the segment results for the quarter and our revised outlook. I'll then turn the call over to Kazuo Hirai, the Executive Deputy President who is responsible for consumer electronics who will speak in more detail about our television business and the recently announced acquisition of the remaining 50% of Sony-Ericsson.

So, let me begin with the results of the consumer products and services segment. CPS segment sales decreased 12%. As was true in the first quarter, the decrease was primarily due to lower sales of LCD TVs and PCs resulting from price declines as well as the unfavorable impact of currency. Bills on a local currency basis declined 7%.

An operating loss of JPY34.6 billion was recorded in this segment as compared with a JPY1 billion operating income in the second quarter of last year. This was driven primarily by deterioration in the cost of sales ratio and lower gross profit resulting from the decrease in sales and partially offset by lower restructuring charges. The operating loss also included a JPY8.6 billion impairment charge against LCD TV assets. Excluding restructuring charges, product categories with deterioration in operating results included LCD televisions, reflecting a decline in prices, and the game business reflecting a strategic price reduction of PS3 hardware in advance of the year end holiday selling season.

Let's take a moment within the consumer products segment to talk about key product categories. In the television business, sales decreased 17% to JPY213 billion due to the price declines resulting from deterioration in the operating environment. During the quarter LCD TV unit sales were essentially unchanged year on year at approximately 5 million units. Excluding restructuring charges, an operating loss of JPY41 billion was recorded in the TV business and that's down JPY25 billion year on year. This was due to market price declines and the fixed asset impairment that I mentioned earlier.

Next is the digital imaging business. Compact digital cameras and video cameras experienced a decline in sales and operating income due to unfavorable exchange rates, price declines, and a decrease in unit sales resulting from a slow down in the market. However, we maintained a high operating profit margin.

In the game business sales which included network service revenues decreased year on year due to the strategic price reduction of PS3 hardware and the PS2 business as a whole which continues to see demand in developing countries but has peaked and is shrinking. As said, PS3 hardware unit sales were 3.7 million units, the highest they've been for a second quarter since the launch of the product in 2006. Operating income in the game business decreased year on year chiefly as a result of strategic price reduction. And finally, PC sales decreased and operating results deteriorated primarily due to price declines, partially offset by higher unit sales.

Turning next to the professional device and solutions segment, PDS sales decreased 11%. This decrease was mainly due to a decrease in sales of the components category where batteries and storage media sales decreased due to the impact of the earthquake. An operating loss of JPY12.3 billion was recorded compared with an operating income of JPY22.8 billion in the same quarter last year. This was primarily due to an increase in restructuring charges and unfavorable exchange rates. Excluding restructuring charges, operating income of JPY9.1 billion was recorded in this segment.

The principle portion of the restructuring charges can be attributed to asset impairment associated with the anticipated sale of the small and medium sized display business to the Innovation Network Corporation of Japan as previously announced. Image sensor sales in the semiconductor business increased year on year. We are continuing to expand this business through capital expenditures from last year and the monthly production capacity of CMOS image sensors has increased from 20 million units in July to 25 million units currently.

Next is the picture segment. Sales increased 17% and operating income of JPY20.6 billion was recorded compared to an operating loss of JPY4.8 billion in the same quarter of the previous fiscal year. Sales increased primarily due to the sale of a participation interest in Spiderman merchandising rights in the current quarter and a significant increase in television sales. Operating results improved significantly primarily due to operating income generated from the sale of the merchandising rights.

Sales in the music segment decreased 7% and operating income decreased 22%. Sales decreased due to the appreciation of the yen and a decrease in album sales outside the United States. Operating income decreased due to new management's acceleration of restructuring aimed at improving profitability partially offset by a benefit from the recognition of digital license revenue.

Next is the financial services segment. Financial services revenue decreased 17% and operating income decreased 43%. Revenue decreased primarily due to deterioration in investment performance at Sony Life as the Japanese stock market declined significantly during the quarter compared with the relatively stable conditions in the same quarter of the previous fiscal year. On the other hand, insurance premium revenue at Sony Life increased, reflecting a higher policy amount in force. Financial services operating income decreased primarily due to the decline in net gains on sales of securities at Sony Life.

Sales at our equity affiliate Sony-Ericsson decreased 1%. Although total unit volume declined, sales remained almost flat due to an increase in average selling price which resulted from a higher portion of smartphone shipments. Sony reported equity net loss at Sony-Ericsson of JPY30 million for the quarter compared to an income of JPY2.6 billion in the same quarter of the previous fiscal year.

So, that ends my explanation of the segment results. Now I'd like to turn to the forecast revision for the fiscal year. Assumed foreign currency exchange rates for the second half are approximately JPY75 to $1 and approximately JPY105 to EUR1. Consolidated sales for the fiscal year are expected to be significantly below the July forecast, primarily due to the updated foreign exchange rate assumptions, the impact of the floods in Thailand, and the impact of lower expected sales, primarily in Europe and the United States.

Consolidated operating income is expected to be significantly below the July forecast for the following reasons. First, the negative impact of the appreciation of the yen on consolidated operating income is expected to be approximately JPY65 billion more than in our July forecast. Second, we currently estimate approximately JPY25 billion net of insurance as the impact of the consolidated operating income from the floods in Thailand in October. This is direct damage to manufacturing facilities and postponement of certain product launches resulting from the impact of parts procurement. Excluding the impact of the floods, we expect the operating results in the CPS segment to be approximately JPY115 billion below the July forecast primarily due to lower expected sales and the unfavorable impact of foreign exchange rates.

Operating loss from LCD televisions is expected to increase significantly from the July forecast. This change is primarily due to a lower unit sales forecast, price competition, unfavorable exchange rates, and the impairments of fixed assets. As the industry growth slows, we are changing our business strategy away from one focus on volume growth in the midterm and we are implementing a variety of metrics that fit with this new policy.

Operating results in the PDS segment are expected to be approximately JPY25 billion below the July forecast, primarily due to lower expected sales and unfavorable foreign exchange rates, partially offset by the anticipated additional benefit of expense reduction, including fixed cost. For the pictures and music segments we now expected operating income for each of those segments to be approximately JPY5 billion below the July forecast and for the financial services segment, it's expected to be approximately JPY10 billion lower than the July forecast.

We expect to record a gain of approximately JPY50 billion on the 50% equity stake Sony currently hold of Sony-Ericsson. Once that entity is fully consolidated which is expected to occur in the fourth quarter of the current fiscal year. Income before income taxes and net income attributable to Sony Corporation stockholders are expected to be below the July forecast due to all the reasons I just mentioned.

So, now I'll turn the call over to Executive Deputy President Hirai to speak with you about the TV profitability improvement plan and the consolidation of Sony-Ericsson. Kazuo?

Thanks, Sam. Hello, everybody. Today I've come here to the earnings announcement to say a few words about the plan we've already begun to implement to improve the profitability of the TV business and also to touch on the consolidation of Sony-Ericsson which we announced the other day.

We at Sony believe that the TV business is essential to Sony's future growth strategy. The entire management team has a great sense of urgency regarding the fact that the TV business has continuously recorded losses for the last seven fiscal years and I will personally take the lead in implementing a plan to improve the profitability of the TV business with the aim of extricating us from this loss making structure as soon as possible. The entire Sony group will be involved in this profitability improvement plan as it cannot be achieved alone by the TV business.

When we announced our midrange plan in November of 2009, we outlined plans to create a structure under which we could obtain a market share of 20% or 40 million units in fiscal year 2012 based on the expectation that the LCD TV market would continue its high level of growth. However, industry growth has clearly slowed and developed countries are experiencing negative growth, especially in the US and Europe where economic conditions have deteriorated.

In regards to our panel procurement strategy, in fiscal year 2009 we assumed that LCD panels would continue to be in short supply but now there is a surplus of panels and as growth has slowed, we have had to drastically change our assumptions regarding a 40 million unit business. It's obvious but we need to design and manufacture at an appropriate cost only the volume of units that we will sell and we need to have a level of fixed costs that is appropriate for the size of our business. Needless to say, we also need to provide customers with products and services that will sell.

In August, I assigned Mr. Imamura who had been the head of the digital imaging group to head the TV business and we have made a plan to revitalize the business after changing our assumptions for market growth and adopting a new view as to the market environment. In the productivity improvement plan we have developed at this time, we are determined to do everything we can during this fiscal year, setting a goal of 20 million units for the year and implementing various measures, including impairment of the machinery and equipment and disposal of unnecessary parts resulting from a reduction in the number of models. The results -- this will result in a large loss this fiscal year but we believe these actions are necessary to turn a profit.

Now I'd like to explain in more concrete terms the profit structure of the TV business this fiscal year. The TV business sales for this fiscal year are expected to be JPY875 billion and we expect to record an operating loss of JPY175 billion. In fiscal year '12 we aim to reduce this operating loss by half and return to profit in FY '13 assuming no increase in sales. Approximately JPY50 billion in additional charges are included in the cost for this fiscal year, primarily resulting from impairment of machinery and equipment and the disposal of unnecessary parts due to the reduction in the number of models all done to transform our operational structure into one that produces 20 million units.

Now some people make think that the primary reason for the loss in the TV business is heavy fixed costs but primarily due to the asset light strategy we have already carried out across our manufacturing facilities, certain reductions in fixed costs have already been achieved. Of course we have to engage in further fixed cost reduction as we change our structure from a 40 million unit to a 20 million unit one but we believe that the biggest issue at present is variable costs.

If we exclude from the expected operating loss for this year approximately JPY50 billion in additional charges associated with the transition to the 20 million unit structure that I just explained, the JPY125 billion remaining amount is the loss we must reduce in order to return to profitability in FY '13. Approximately 40% of that amount is expected to come from reduction of LCD panel costs which are included in variable costs.

The loss of approximately JPY50 billion has arisen because costs have not kept pace with the rapid decrease in market prices causing panel prices to no longer be competitive and because S-LCD is not operating at full capacity this fiscal year due to our changing our 40 million unit structure. So, as a result at present, Sony and Samsung are considering a variety of measures to improve competitiveness and are discussing plans that will benefit both Sony and Samsung in the future. The most basic way to improve marginal profit is to increase the appeal of our products and reform our operations. These measures will account for 30% of the amount of loss we must reduce to return to profitability.

On a geographic basis, in developed countries, improvements in profitability will come from reducing fixed costs and improving the model mix instead of increasing volume. In developing countries, market expansion is expected. There, our brand image is strong and profitability is still high. We will aim to expand at a rate faster than the market through enhancing models designed specifically for the needs of those regions and we expect profitability to improve even further.

In the area of supply chain management, new systems have been up and running since this May and we have reduced inventory turnover by 30 days. In FY '12 we aim to reduce turnover by a further ten days. Regarding product differentiation, we will deploy unique technologies such as super-resolution high image quality engines that create the industry's best picture. Also, there will come a time when a next-generation panel will take the place of LCD panels. So that we can lead the industry in this transition, we have accelerated the development of next-generation TV panels. Now, of course, due to competitive reasons, I cannot discuss today what type of technology we're focusing on.

Through implementation of our asset light strategy in manufacturing, our use of ODMs and OEMs has increased and this has contributed to cash flow. In order to actually improve manufacturing and design costs however we believe that it's essential to utilize ODMs and OEMs even more efficiently while optimizing our organization and we will aggressively implement these measures.

As we announced yesterday, as of November 1, we've changed the organizational of the TV business unit. Up until now, the TV business unit was one large unit. Now we have separated into three fields each with a clear mission and also a clear responsibility.

First, we have put the legacy LCD TV business into a business unit that is focused on enhancing our products through internal design and manufacturing. In this unit, we will work to enhance the appeal of products while improving product quality and ensuring greater efficiency in our operations.

Next, we have put the ODM business into another business unit that makes products at low cost through external design and manufacturing. And by separating this unit from the units focused on internal manufacturing, we will create an operation that is separated from waste and is independent of the legacy framework.

Last, we have made a business unit for the group that is developing and designing the next-generation televisions. Here we will create the next generation of home entertainment that fits the entire Company's next-generation product strategies. We've also strengthened upstream processes by consolidating the marketing and product strategy functions so that product development does not stray from the center.

Now, approximately 30% of the loss we must reduce is expected to come from measures such as reduction of SG&A at sales companies in developed countries, improved efficiency of R&D through reform of our design processes, transfer of the design processes to Malaysia and other overseas locations and reduction of indirect costs at headquarters and the business groups.

So, this is not something that can be solved just in the TV business. In fact, this is a project for the entire Company. By reducing fixed costs at the sales companies, improving efficiency of R&D, and reducing indirect costs, we will implement restructuring so that the benefit can be seen in fiscal year '13.

We will undertake restructuring with no areas kept off limits. Now, I will not comment today on the number of people and other details here. The recovery of the TV business is the most pressing issue, not only for Sony's consumer electronics business but in fact also for the entire Sony group. However, the TV business is not the only business at Sony. While improving the profitability of the TV business, we will steadfastly and quickly implement a growth strategy.

Since being appointed the head of the consumer electronics business in April, I have been saying that there are three essential priorities that we must tackle. One, the improvement of the profitability of the TV business. Second, the expansion of the mobile business, including smartphones. And third, the proactive development of horizontal business themes such as network services aimed at enhancing individual products and providing a unified user experience.

The full consolidation of Sony-Ericsson which we announced last week and the strategic acquisition of intellectual properties is also one of these elements. Through this acquisition we have added a vital element to help accelerate our four screen strategy of smartphones, tablets, PCs, and TVs. While we will work on a detailed plan towards the closing of the transaction expected in January of next year, please allow me to explain some of the key rationale of this deal and the benefits we expect to derive from it.

The strategic importance of smartphones has increased considerably in the context of our network products from the perspective of consumer needs and in terms of their influence on other products and services. We believe that it is crucial for us to obtain a complete operating control over this business, increased development and operational speed and obtain the leading position in smartphones in order to grow Sony's overall mobile business strategy.

One of the highest priority goals for Sony-Ericsson is increasing its presence in the North American market which has the largest market for smartphones. We believe that it will be easier to take various actions once we make the Company a 100% subsidiary of Sony. For example, Sony-Ericsson's Xperia series is having great success in the Japanese market which is an area where Sony-Ericsson has a very strong relationship with Sony. By promoting initiatives such as consolidation with the Sony brand, cooperation in both sales and marketing and enhanced ties between network services built around both the PlayStation network as well as the Sony Entertainment network and rich content, we will build a strong foundation in the North American market.

Of course there are also many other benefits for Sony businesses. We will provide a unified user experience across our smartphones, tablets, walkman, and other mobile products and these can also be applied to televisions as well. Under a common service platform and user interface, we will offer consumers many unique forms of content and also entertainment as well as applications across various different screen sizes and devices. And this will aid in enhancing the appeal of Sony's televisions.

Moreover, the relationships Sony-Ericsson has built over the last ten years with network operators and the expertise it has developed in the field of communications will greatly benefit the business expansion of Sony products that have communications capabilities, including the Sony tablets, PlayStation media, and the Reader. The intellectual property agreement we have obtained this time will enable us to utilize important patents in many Sony communication devices in addition to Sony-Ericsson devices.

From the perspective of product development as well there are some significant benefits for Sony and Sony-Ericsson. Up until now, Sony-Ericsson has launched products that contain technologies and applications from many Sony products such as Walkman, Cybershot, and PlayStation. Going forward, cooperation will be accelerated even further and we expect to plan and develop products in a much short time than before.

Moreover, by strengthening cooperation and conversions, there are still many opportunities to raise operational speed and efficiencies in areas such as product planning, development, design, sales, and other business processes and needless to say we will proactively pursue each of this variety of initiatives.

Finally, the environment surrounding the consumer electronics business is expected to be continuing to be severe. However, we will consistently and steadfastly implement our policy of inspiring our customers through the unification of compelling products, content and services that is uniquely Sony. And we believe that this is the best means by which to grow and also improve our profitability.

Thank you very much.

Thanks so much, Kazuo. Frances, if you would, please, let's get started on the Q&A session.

(Operator Instructions) Our first question is from the line of Daniel Ernst from Hudson Square Research. You may proceed.

Yes. Good morning. Good evening. Thanks for taking my call. Hirai-san, I have a big picture question I'd like to ask here, not one necessarily about profits or margins per say. You touched on some of these points earlier but to me the bold case for selling has always been your unique position to combine hardware, content, into an experience that differentiates you from the competition and is compelling to consumers. I think many in tech talk about creating the three screen experience. But Sony now actually has five screens. You're in theater, you're in TV, PC, phone, and tablet. Sony produces films, TV shows, music, and games. So, my question is can Sony still tie all these assets together in a way that makes consumers and markets stand up and notice? Thank you.

Thanks for the question. It's interesting. You talk about five screens that includes theaters. And in the same vein we might perhaps also add a sixth screen which would be the PlayStation Vita. So, actually the lineup goes on and on. But usually we tend to talk about three screens or we add the TV and we talk about the four screen experience as you probably know.

And with regard to your question, I think the quick answer is yes. There are many ways that we have gone about doing this in the past as well as many ways that will allow us to do this going forward into the future, especially given the growth of the network services, both in terms of the PlayStation network as well as the Sony Entertainment network. Basically one of the most important things, first, is of course for each of the various businesses that you mentioned -- whether it's the picture company, the music company, the electronics company, or SCE. They obviously need to be profitable and revenue and also profit generators obviously in each of their own respective business areas. But I think the power when we combine some of the assets that we have to create something new is when we are truly creating something that is unique to Sony.

And a great example of course would be in the area of network services, how we've been able to bring our games and the PlayStation -- and games both from first and third-party for that matter to really make a compelling network service for PlayStation network. We're also doing that now with both the Video Unlimited service as well as Music Unlimited which are great services that we've just introduced under the Sony entertainment network banner. That is already servicing a lot of the devices that have recently come into the market and most recently serving the Sony tablets and we will continue to come up with new ways of really marrying the content and also the devices and then connecting them through the networks again for the consumers to really get a uniquely Sony experience.

And the other aspect that I'll add is in addition to some of the content that you talked about here, whether it's music or film, TV shows, et cetera, I think the other compelling and very important aspect as we move down this path of a network connected world is to make sure that we also bring together a very compelling social or community experience consumers through the common enjoyment of particularly pieces of software or content. And that community or social experience I think is going to be another very important element of making sure that we tie all these elements together again in a very Sony unique way.

Okay. Thank you. I actually have a follow-up question on the plan for the TV business. Obviously this is an area that needs a great deal of restructuring and refocusing after seven years but my question or concern is by splitting up the TV business into three separate units, do we run the risk of making them harder to manage? Are we not able or -- is it more difficult manage to the singular goal of becoming profitable when you have sort of three different division heads that may march to a slightly different beat than the other?

Very good question, thank you. I think that given the size and the scope of the TV business as an organization, we actually felt that it needed to be divided into the three groups as I described so that each of the groups or subgroups if you will are given clearer objectives and goals and mandates so that again rather than trying to manage one big organization that's given a lot of different mandates which actually was more difficult to manage, we felt that it was appropriate for us to divide it into the three groups that I described. Now they all continue to report to Mr. Imamura and needless to say, he's going to be managing the group very closely in conjunction with myself and I think again given the size and the scope and the complexity of the TV business that we're in, this is probably the best approach for us to make sure that we're clearly setting goals and objectives and achieving those.

Okay. Thank you.

Your next question is from the line of Andy Hargreaves with Pacific Crest. You may proceed.

Hi. Thank you. Just staying on TVs real quit, part of the profit improvement is expected to come from panel price reductions. I guess the question is -- is there still room for your costs to come down significantly more than the broader market and if not, why wouldn't those cost reductions flow through into retail price reductions and limit the amount of improved profitability you're able to get?

I'm not sure I understood the question properly, so let me try to answer it and if I didn't hit the mark, let me know? First of all, obviously we -- as I said in my presentation, we're working with our partners to make sure that we are able to procure panels at a competitive price and again that is a large component of the cost that goes into television sets. And I think one of the things that -- but that alone is not going to solve all of our issues and some of the other initiatives that I mentioned as well need all to come together in order for us to turn the TV business around. So, it's obviously -- the first stop will be the panel costs but there are other issues that we need to tackle as well. I don't know if that answers the question but if not, let me know.

Yes. The question is basically price declines -- retail price declines in the industry.

Right. Of course.

Why would the costs savings not flow through to the consumer rather than you guys? And then just a follow-up on that, on the other side, the other component that you just mentioned is making the products more attractive and it's effectively gaining share. My question there is what do you think will make TVs more attractive and is part of the problem that consumers are viewing them essentially as monitors?

Right. So, first of all, I think that if we're able to procure panels from the market under competitive pricing, that's, again, a very important component. I think the bigger or perhaps more important is in this commoditized market where the price is always on a decline. How do we make sure that we continue to have a product that is differentiated and is also a good value proposition to the consumers and I think that we need to realize that the day and age where we are able to differentiate product based on the panel itself -- those days are gone.

What we need to do is again based on panels that have already been commoditized, what can we do at Sony -- what is the secret sauce or the spice that we can add in the componentry to have better picture quality, better sound quality which allows us to differentiate our products and perhaps command a premium over competitors. And I think that's an area where we certainly have a track record of and are continuing to develop various technologies that really allow us to differentiate our picture quality, our sound quality, as well as other features and functionalities, whether it's network services -- and those are the areas that we need to really focus on once we are able to again procure competitive panels -- at a competitive price. I'm sorry.

Yes. That's helpful. Thank you. And then just kind of moving on to you mentioned being able to produce a common interface across devices as an advantage. Clearly you have community properties there on the PlayStation side in particular but the user -- excuse me, the operating system you don't want to have. So, is the strategy to continue to rely on effectively Android and kind of expand that maybe across product lines? Or is there a broader operating system strategy there?

Sure. I think that if you look across our product portfolio, obviously there are products that rely on the Android operating system. There are products that are being powered by Windows and the Microsoft operating system. But you also have to realize that the PlayStation products, they run under a PlayStation operating system as well. So, our strategy basically is to implement and use operating systems where we believe it's the right system to use for a particular product. So, we don't have a strategy of saying everything needs to be under one kind of operating system but again to make sure that it's optimized for the best use of each operating system for the kind of devices that we have in the market.

Okay. Thanks. And then just last, is the primary component impact from the Thailand floods for you guys hard to describe as well or is there some other component that's kind of critical?

Flood impact in Thailand? Okay. Sorry. Your question was with regard to the flood impact and what? I'm sorry.

Yes. What specific components? Can you be more specific about what is being impacted? Is it -- ?

Sure. Actually it's very difficult to be specific because there are so many partners that we work with that have manufacturing facilities in Thailand. It's not just hard disk drives but a host of other components as well. And the unfortunate thing this time with the flooding perhaps as compared to the earthquake is the fact that with the earthquakes in Japan, we were able to access the damage very quickly but with the floods, unfortunately because it's a moving issue, suppliers that were deemed to be okay yesterday unfortunately got flooded today. That sort of thing happens constantly.

So, it's very hard for us to ascertain which components we're talking about. Specifically, with regard to some of the products that are impacted as far as our products go, this also runs the gamut from our Alpha digital SLRs to our Cybershot cameras to image sensors, headphones, lenses for our cameras. So, there are a lot of different areas of product that are also being impacted in addition again to a supply of parts where for example even if we don't manufacture in Thailand because the parts are being supplied to other factories say in China or elsewhere their lines need to stop because again we -- they aren't able to get parts supplied to them from their suppliers.

Thanks. That's helpful.

At this time there are no other questions. I would like to turn the call to Sam Levenson for closing remarks.

Thank you, Frances. Perfect timing because we've hit our time allotment here. I want to thank Kazuo for joining us tonight and covering these additional subjects. Very helpful. If there are any further questions from people on the line, please feel free to give our IR offices in Tokyo or London or New York a call. Thank you all for joining us.

Thank you.

Ladies and gentlemen, this concludes your presentation. You may now disconnect and have a good day.