索尼 (SONY) 2011 Q4 法說會逐字稿

Now we would like to start the announcement of Sony Corporation's fiscal year 2011 consolidated financial results. Let me introduce the presenters; to your right Corporate Executive Officer, EVP and CFO, Masaru Kato; Head of the IR, Yoshinori Hashitani. First of all on the consolidated financial results, Kato will give a presentation.

First, I'd like to explain the consolidated results for fiscal 2011. Sales decreased year on year due to negative ForEx impact, the impact of the earthquake and the flood in Thailand, and deterioration in market conditions in developed countries.

Operating loss was recorded due to the lower sales factors, and significant deterioration in equity in net income of our affiliated companies.

A large net loss attributable to Sony Corporation shareholders was recorded, due to provision of a valuation allowance against deferred tax assets, mainly in the US. This valuation allowance was a non-cash charge and has no impact on cash flows.

On April 10, we announced a downward revision in our financial results forecast for fiscal 2011 due to a significant increase in tax expense, including the establishment of valuation allowance against deferred tax assets in the US.

At that time, we explained that we were keeping our forecast of JPY95 billion operating loss announced at the third quarter earnings announcement on February 2. However, thanks to the improvement in fourth quarter operational results, [final] operating loss was JPY67.3 billion.

We also said the net loss was expected to be JPY520 billion, but owing to a decrease in tax expense below April 10 forecast, net loss was JPY456.7 billion.

Operating income of JPY180 billion in forecast for fiscal 2012 due to a significant improvement in operating results in the Consumer Products & Services, and the Professional Device & Solutions segments, are expected to recover from the earthquake and flood.

We also expect to record JPY30 billion in net income attributable to Sony Corporation's stockholders.

Now I'm explain the income statement. Consolidated sales decreased 9.6% year on year due to the negative impact of foreign exchange rates, and impact of the earthquake and the flood, and deterioration in the market environment in developed countries.

On a local country basis, sales decreased 5%. On a segment basis, sales of primarily the CPS and PDS segments decreased. Consolidated operating loss was JPY67.3 billion compared to the profit of JPY199.8 billion in the previous fiscal year.

This deterioration in operating results was primarily due to the lower sales I just explained, and the significant deterioration in equity and net income of our affiliated companies. Although, JPY102.3 billion remeasurement gain was recorded due to 100% ownership of Sony Eriksson.

Equity in net loss of affiliated companies recorded within operating loss was JPY121.7 billion, compared to profit of JPY14.1 billion in the previous fiscal year. Equity in net loss of S-LCD joint venture with Samsung was JPY64.1 billion due to the recording of a JPY60 billion loss on the sales of our shares in S-LCD.

Equity in net loss of Sony Eriksson was JPY57.7 billion. This was due to the recording of a JPY33 billion valuation allowance on certain deferred tax assets at Sony Eriksson; a decrease in unit sales; the negative impact of intense smartphone price competition; and higher restructuring charges.

The net effect of other income and expenses was an expense of JPY15.9 billion, compared to a profit of JPY5.2 billion in the previous fiscal year, due to recording of foreign exchange loss compared to a foreign exchange gain the previous fiscal year.

Loss before income taxes was JPY83.2 billion, compared to a profit JPY205 billion in the previous fiscal year. Income taxes of JPY315.2 billion was recorded due to the recording of a non-cash charge of JPY260.3 billion for valuation allowance against DTA in the US.

Net loss attributable to Sony Corporation stockholders was JPY456.7 billion, compared to net loss of JPY259.6 billion in the previous fiscal year. Yoshinori Hashitani will explain this at [mid] results.

Fiscal '11 sales and operating income by segment are as you see. First, let me explain the results of Consumer Products & Services segment. CPS segment sales decreased 19% due to an impact of the earthquake and the flood in Thailand. On a product category basis, decreased sales of LCD televisions were a major factor where our operation is aimed at improving profitability, rather than pursuing volume. And there also was the impact of a price drop and exchange rate, so the operating loss was JPY229.8 billion, compared to the income of JPY10.8 billion the previous year.

This decrease is driven by a decrease in gross profit and also, in the cost of sales ratio and deterioration in equity in net income are the primary factors behind change, as you see.

And the positive factors, [JPY30.4 billion](Sic-see presentation slides) decrease in SG&A and JPY19.2 billion decrease in restructuring charges, and the negative factors JPY97.4 billion decrease in gross profit and JPY82 billion deterioration in the cost of sales ratio, and JPY71.3 billion deterioration in equity in net income.

Excluding restructuring charges and one-time charges for the categories that led to the deterioration in operating results include LCD television, reflecting increased LCD panel-related expenses due to low capacity utilization in S-LCD, and declining sales [in] Game business.

Next, let me talk about TV business. Sales in TV business decreased 28% year on year to [JPY840 billion] as we explained at our earnings announcement in November last year, with decreases due to scaling back operations, not pursuing volume in order to secure stable profit foundation. And it was also due to a price decline and a severe situation.

The unit sales increased by 13% to 19.6 million units. And the operating loss was JPY148 billion, JPY73 billion worse than the previous fiscal year. But compared to JPY175 billion loss forecast in November when we announced the profit improvement plan, this is an improvement of JPY27 billion, already showing the benefit of S-LCD dissolution.

We recorded JPY60 billion in losses associated with the sales of our equity stake in S-LCD this fiscal year. Including this loss, operating loss was [JPY280 billion].

The profitability of the TV business is improving faster than we expected, and we are making steady headway towards a better profitability structure and a positive turnaround.

The [CPS] business suffered a decrease in sales and profits due to the impact of the earthquake and Thai floods. Sales and profits of video cameras decreased due to the natural disasters, decreasing unit sales resulting from the contraction of the market in the west, and price decline. However, we continue to maintain a stable level of profitability through cost reduction.

Compact digital cameras experienced a decline in sales and profit due to the natural disasters, decreasing unit sales resulting from the deterioration in market conditions in the west, and the ForEx impact. We have begun introducing some of the models we used to produce in Thailand in China and Japan.

The impact of the Thai floods on our interchangeable lenses alone was extremely severe. Sales decreased significantly due to unit sales decline from delays in new product launches, and the ForEx impact, but loss was less than the previous fiscal year.

Next is the Game business. Our flagship product, PS3, continues to maintain around [14 million] unit level sales, and is selling well with software. At the end of March we achieved unit sales of 1.8 million of PS3 [with that re-launch].

As for Networked Service business, the amount of content, the number of countries we're active, the number of [portable] devices are expanding. However, overall Game sales decreased due to the ForEx impact and the strategic price reduction of PS3 hardware. Operating income decreased due to the impact of the sales decline and asset impairment in the Networked Service business.

PDS sales decreased 13% due to the impact of the earthquake on batteries and storage media, and the ForEx impact. An operating loss of JPY20.2 billion was recorded, compared to the operating income of JPY27.7 billion in the previous year. This was primarily due to the deterioration in the cost of sales ratio, the ForEx impact, and a decrease in gross profit resulting from lower sales, partially offset by a decrease in SG&A.

A positive factor for the PDS segment was a JPY29.5 billion decrease in SG&A, JPY11.4 billion gain on the sale of assets impairment and others. Negative factors; JPY42.4 billion(Sic-see presentation slides) deterioration in cost of sales ratio, JPY27.5 billion negative impact of ForEx, JPY12.5 billion decrease in gross profit.

Excluding restructuring charges, the principal product category that contributed the most to the decline in operating results was components. Sales in Semiconductor business decreased due to the impact of the earthquake and Thai floods. Operating income was essentially unchanged, because the continuation of increased image sensor sales and expanded image sensor production capacity was offset by the sales decrease of the category, and an increase in fixed costs from production capacity increase.

The floods caused direct damage to our manufacturing facilities, affecting the supply of image sensors. However, we have invested in Kumamoto and Nagasaki plants and, as we planned, we have been able to increase our production capacity twofold.

Inventory for CPS and PDS segments at the end of March decreased 7% to JPY564.3 billion.

Picture segment. Sales increased 10% and operating income of JPY34.1 billion was recorded, a decrease of JPY4.5 billion. The sales increase was due to higher television revenues in the US, revenue recognized from the consolidation of the Game Show Network, which was accounted for under the equity method in the previous year, and the sale of participation interests in Spiderman merchandising rights.

Operating income decreased. The decrease was due to a combined JPY30.3 billion gain recognized in the previous year consisting of a remeasurement gain on the acquisition of controlling interest in GSN, and a gain on the sale of our remaining equity in a Latin America premium pay television business, as well as the appreciation of the [yen], partially offset by JPY21.4 billion operating income from the sale of the interest Spiderman rights.

Sales in Music decreased 6%, and the OI decreased JPY2 billion to JPY36.9 billion. Sales decreased primarily due to the impact of the ForEx and the continued contraction in the physical music market, although Adele's 21 was the number 1. Now even though the aggressive restructuring by the new management at Sony Music Entertainment resulted in a reduction of overhead costs, the operating income decreased.

Next is the Financial Services. Our revenue increased 8% and OI increased JPY12.6 billion to JPY131.4 billion. Revenue increased mainly due to an increase in insurance premium revenue, reflecting a higher policy amount in force at Sony Life. Operating income increased due a greater profit from the higher insurance premium revenue at Sony Life, and a partial reversal of results taken in previous year for the earthquake-related insurance claim payments.

I will now explain the results of Sony Mobile Communications, which we refer to as Sony Mobile.

Sony Ericsson became a fully consolidated subsidiary of Sony on February 15, 2012. The results of Sony Mobile, included in Sony consolidated results, comprised of equity in net loss of Sony Ericsson through February 15, 2012, sales and operating loss of Sony Mobile from February 16 to March 31, and remeasurement gain recorded, due to our taking control of that Company.

Sales of the segment were JPY77.7 billion. This is the amount of sales from February 16 to March 31, the period of time after which Sony Ericsson was consolidated. JPY31.4 billion in operating income was recorded at Sony Mobile. This amount was the result of the following three factors.

First, Sony recorded equity in net loss from Sony Ericsson of JPY57.7 million, compared to equity net income of JPY4.2 billion in the previous year, for the period through February 15, 2012. Included in this loss was 50% or JPY33 billion of the valuation allowance against deferred tax assets Sony Ericsson recorded, and the US GAAP in the quarter ended December 31, 2011.

Second, Sony recorded a non-cash valuation gain of JPY102.3 billion at the time of the consolidation of Sony Ericsson, as a result of our remeasurement of the fair value of the 50% stake of Sony Ericsson we owned prior to the consolidation.

Third, Sony recorded a JPY13.2 billion operating loss from Sony Mobile for the period from February 16, 2012 to March 31, 2012.

Next, I would like to explain our forecast for the fiscal year ending March 31, 2013. Assumed foreign currency exchange rate for the fiscal year approximately JPY80 to the $1, approximately JPY105 to the EUR1, JPY2 lower from the previous year for the dollar, and JPY3 higher for the euro.

Consolidated sales for FY'12 are expected to increase 14% year on year, to JPY7,400 billion, due to an expected recovery from the impact of earthquake and floods, and consolidated Sony Mobile for the full fiscal year.

Operating results are expected to improve from the previous fiscal year, a loss of JPY67.3 billion, to a profit of JPY180 billion. Improvement is expected to be seen in the PDS segment and in the CPS segment, in which sales are expected to increase, and LCD TV losses expected to shrink significantly.

Equity in net loss within operating results for FY'12 is expected to be approximately JPY5 billion, significantly less than the JPY121.7 billion of the previous year. The lower loss is due to no longer having S-LCD and Sony Ericsson included in the results.

Income before income tax is expected to be JPY190 billion, compared to the loss of JPY83.2 billion in the previous year, due to significant improvement in the operating results.

Due to the establishment of valuation allowance against deferred tax assets, net loss attributable to Sony stockholders in the previous year was JPY456.7 billion. FY'12, we expect to improve this significantly to a JPY30 billion profit.

Next, I would like to explain each business segment. First are the CPS and PDS electronics segment. Rebuilding these businesses is an urgent matter for the Sony Group, and FY'12 is an extremely important year for [revitalizing] electronics.

First is CPS. We expect LCD television sales to decrease, due to our intention not to pursue volume and to run the business with an emphasis on improving the profitability.

On the other hand, we expect our segment sales to increase significantly, due to an expected recovery, primarily in the Digital Imaging and PC businesses, from earthquake and the Thai floods.

We expect to record a significant decrease in operating loss for the overall segment, primarily due to recovery from the earthquake and floods, and expected significant decrease from LCD television losses.

When we announced our profitability improvement plan for the TV business in November last year, we said that we expected loss in television to be JPY175 billion for FY'11. We were aiming to reduce the loss in FY'12 to half of the JPY175 billion amount, and that we were aiming to turn a profit FY'13.

As I said earlier, compared to original projection loss, excluding the impairment of S-LCD in FY'11, improved JPY27 billion to JPY148 billion, due to the benefit of the dissolution of S-LCD.

Loss in FY'12 is expected to be around JPY80 billion, less than the half of the JPY175 billion. Our TV profitability improvement plan is progressing according to the plan.

We expect sales in the PDS segment to increase year on year, because although sales of the Semiconductor category is expected to decrease, due to the sale of small and medium size display business, a significant recovery is expected from the earthquake and floods, primarily in the Component category.

We expect overall segment operating results to improve significantly from the loss of previous year, and for the profit to be recorded, due to significant improvement from recovery from earthquake and floods, primarily in the Component category.

Image sensors, which are receiving a great deal of attention, are expected to continue to maintain high level profitability, and lead the segment in FY'12.

Pictures segment; sales expected to increase year on year, due to greater number of major releases, including the Amazing Spiderman, Men in Black 3, and the 007 Skyfall, compared to the previous year, an increase in television revenue, and the increase in advertising revenue from television networks. Operating income is expected to increase, primarily due to an increase in sales.

Music segment sales are expected to be essentially unchanged year on year, because an expected expansion of this revenue will likely to be offset by an expected continued decline in the physical market for music.

Operating income is expected to be essentially unchanged as well, primarily due to higher Digital revenue and decrease in restructuring charges being offset primarily by one-time profit recorded in the prior year, relating to the recognition of digital license revenues.

We will accelerate the utilization of the rich entertainment assets within the Sony Group, as the current CEO of Sony Pictures, Michael Lynton, takes on a leadership role of both Pictures and Music businesses in June.

The next is the Financial Services segment. We expect Financial Services revenue to increase in FY'12, due to continued steady expansion of the business, which has a stable operational foundation. We expect operating income to decrease year on year, without any gains on the sale of securities investments, similar to those recorded in the previous year, for FY'12. But we are expecting this segment to continue to contribute a high level of profit.

As was explained at our corporate strategy meeting, Mobile, along with Digital Imaging and Game, is one of our core businesses in which we are concentrating management resources. We expect sales of Sony Mobile to increase significantly, due to a full consolidation of that business.

If sales of Sony Ericsson had been consolidated for the full year in FY'11, sales would have been expected to increase significantly year on year, due to an increase in smartphone unit sales.

Despite continued severity of competition in the smartphone market on a performance basis, we expect a significant [decrease] in operating losses, primarily due to improvement in the product mix and cost reductions.

However, for the overall segment, due to the recording of the large remeasurement gain in the previous year, we expect operating results to deteriorate significantly, versus the previous year.

That is the forecast for each segment.

By further strengthening Pictures, Music and Financial Services, which already consistently contribute to profitability, and by improving the profitability of the Electronics business, we aim to improve the profitability of the entire Sony Group.

In FY'12, we aim to turn three things to the black. The first, Electronics business, and our net profit, and our cash flow. And by achieving those three areas into black, we would like to improve our business performance. Thank you.

The breakdown of Sony Mobile area, the same table is included in the earnings release.

The floor is open to your questions. So please wait for the microphone, and state your name and affiliation. In view of time constraints, please confine to one question per person for the first round. Please, are there any questions?

[Nakane], Deutsche. One point about the cash financing plan for the current fiscal year. The P&L and the announced number, the cash flow, and also the year and [BS] picture. And also, what would be the asset and the liability at the year end?

About the cash position, every time we talk about this, we talk in terms of excluding Financial Services business. But at the year end, the cash and deposit at hand is in excess of JPY700 million.

And as usual, towards the year end, the production is increased, so the investment in inventory, and the need for fund is associated. And also, we have some investment projects.

So about funding, we will conduct that as usual; especially towards the summer, there will be a redemption of the debt. So including that, starting this year, we have resort to various means of funding, including the borrowing from financial institutions, and the floatation of straight bonds.

So along the line of your question, you might be asking about the equity financing possibility. That's one of the options indeed, but at this point in time, we don't have any specific plan per se, at the moment.

Ezawa, Citigroup Securities. This is a major point; in your policy corporate strategy meeting, because of the announcements, stock price came down significantly. So do you have any summary and reflection of this corporate strategy meeting and its impact?

There wasn't any additional negative factor about the forecast of the performance, but the stock price came down anyhow. So maybe the corporate strategy meeting itself was not so well appreciated by the participants.

What I wanted to ask was when you look at this meeting, what factors were negative? What didn't go well? And what are you going to do from now on?

About this corporate strategy meeting, well, of course, it's up to you to really judge whether that was good or bad, from your point of view.

But from our point of view, about how it was received, I would say as follows. There's a new management structure under Hirai, and he expressed indomitable resolve to really change. And I think this determination to change was well communicated and understood by you.

But on the other hand, about concrete corporate measures or business measures, business strategy, we explained the medium-term measures and the focus focal points. But maybe you received that, you listened to those actually planned, but you were not really persuaded fully, because maybe there were not the sufficient concrete measures to really change the performance.

So if we reflect upon that sort of meeting, maybe the timing of that sort of meeting might have to be reconsidered. We did not have that sort of corporate strategy meeting, and because of the new management we did it.

But that was before the announcement of the results of FY'11. Of course, because the management structure changed on April 1, we organized that meeting. But it might have been better if we had organized that after, when we could announce the results of FY'11, because we could have cited more numbers.

Maybe the explanation was not well supported by specific numbers. And in the future, Hirai has an intention to organize this sort of meeting every year. So we will think about the timing of holding corporate strategy meeting based on our reflection on that.

About the stock price change. From my perspective, I cannot say whether the stock price is high or low, in my position. However, as the yen appreciated a bit, and situations in Europe, and the future negative news about the US economy, because of all these factors, the entire market actually declined.

We are sensitive to euro situation, and maybe that is why our stock price came down.

And news that we are emitting in the current period, we did not actually issue any specific major announcements. But maybe because of the market conditions, the stock price came down.

Miura, SMBC Nikko Securities. My question concerns Sony Mobile; in the past, it was Sony Ericsson. And you announced the sales units, and you have that. What was the unit sales of the cell phones in the fiscal '11, plus the plan for fiscal '12?

And also, what's the smartphone situation for fiscal '11 and fiscal '12? And for fiscal '11, how much restructuring took place, and what will be the effect of it, especially the performance of [results aggravated]? And we like to know if there will be improvement in fiscal '12, which I consider is still questionable.

About the specific number of units, Mr. Hashitani will respond.

In the past, we disclosed it. Say for smartphone, we intend to expand the sales volumes and I think there is a specific number of units of sales from 22.5 million up to 33.7 million units.

About profit and loss. In an overall sense, as I explained, fiscal '11, we recorded the remeasurement gain in excess of JPY100 billion. For fiscal '12, we don't have that and, therefore, compared to previous year, declined. However, if you look at the actual operation, we aim at a major compression of the margin of loss.

And last year, we established a valuation allowance against a DTA to the tune of JPY33 billion. We don't have that this year. And excluding that, in actual operation, we will strive to compress the margin of loss.

To that end, restructuring efforts have already started, and we recorded restructuring charges. And that's one of the factors behind the aggravation of the profit picture last year. But we will see the positive effect of it in the course of this fiscal year.

And for manufacturing; Monozukuri and, uniquely, Sony smartphone, well, now we have 100% control of the entity. In the past, because its joint venture, some of the measures we could not take timely, or the product planning. But we have free hand here, and we can inject all the assets and the technology we have in Sony Group.

Also, we are deeply involved in network businesses, and we have contents, including game and other aspects. Therefore, we can combine such attractive assets to make the smartphones all the more enticing and attractive to the users.

So with all these measures we will make a steady headway towards the improvement of profitability.

One point; for fiscal '11, what was the total number of cell phone sales? And for current year, are they all the smartphones?

In terms of an explanation of a trend, we only disclose the numbers for smartphones.

But feature phones?

We place emphasis on smartphone and the feature phone units will not exert much impact on the actual operational results.

Thank you.

Fujimori, Barclays. In your plan for this fiscal year, do you have any specific factors? Net income seems to be quite low. What is the background behind the low level of net income and operating profit? You sold the Sony Chemical, is that impact included in the operating profit? And if it is, to what extent?

The JPY75 billion restructuring charge, is it net of the insurance premium received? Is my understanding correct or not?

And the impact of the flood; I think there might be some more remaining impact from the flood for this fiscal year. I would like to know a bit more about the actual profits image.

JPY30 billion profit; that would be the net income. The management has indomitable resolve to achieve this, because we have been actually making loss for five periods in a loss. And tax expense, and how we look at tax expense, has some impact on this in operating loss. Actually, it's JPY180 billion operating profit, but it's going to come down to JPY30 billion in net income.

In Sony Financial, we have 60% equity. There is minority shareholders and they have interests.

And we have a provision for VA, valuation allowance. Last year we did it in Japan, and this year we did it in the USA. So even though there's a profit, there's no tax expense posted in those areas. And if it's the other way round, there's no reversal of deferred tax assets.

By region, in emerging markets; entities in emerging markets are making profits, so they will pay tax. So there are ins and outs, and quite complicated by region. And if we all them up, those are the numbers we announced.

Now, about the sale of Chemical product. It is incorporated in our business plan. I cannot disclose the exact value, but we have signed MOU, and we are negotiating toward the definitive agreement. We have some solid prospects, so it is incorporated in our forecast.

Now, restructuring charge and insurance payment. Flood-related insurance and the restructuring charge are two different things. But out of JPY75 billion, the breakdown of JPY75 billion, as I mentioned beforehand, we tried to compress our fixed costs, and we will do it with a vengeance for this fiscal year. Our personnel cost accounts for 70%, 80% of the restructuring charge.

In the CPS, PDS, in other words, electronics, and in headquarters and overseas sales companies, we will do restructuring, but mainly, it's going to be done in electronics.

About the insurance related to the floods in Thailand. I cannot say exact numbers, but the timing of receiving the insurance payment, it depends on negotiations and submission of data. So we will receive some insurance payment in this fiscal year.

So JPY30 billion, incorporating all these factors, it's based on our business plan where we can actually achieve the business plan [solidly]; we can achieve JPY30 billion. Thank you.

To supplement, the gain of the sale from the Chemical business, is it a large one? Or not large enough to change your business prospect?

We are still in the midst of negotiation, and how we look at the gain, I'm not able to disclose. I'm sorry.

I understand. Thank you.

And JPY30 billion that you talked about; JPY180 billion net OP is generated, we believe that the bottom line would be higher.

But JPY180 billion OP leads to the JPY30 billion, the net income. Is that right?

Structurally you're right, yes.

Mikoshiba, Nomura Securities. The unit sales of TV and price, that I would like to ask you. About unit sales of TV, you may still have a feeling to stick to JPY20 million, but you revised downward. And so by the regions, geographically, what is the difference of unit sales in your forecast?

And price, better prices, are they assumed to be flood, or is there any chance that price increases for the low end; you stop the low end? Or you still have a feeling to stick to the 20 million, and is there any timing that you try to achieve the 20 million units?

Last year, 19.6 million units, and this year 17.5 million units. That's what we have been describing to you.

But if you look at the details. On one hand, market has become quite mature, and particularly in Japan and US, it has [become more] mature, but in other areas like emerging countries, market is still growing. And so in a mature, developed market we have no intention to pursue the volume, even engaging in the competition of the prices. But in emerging markets, still the market is growing and, therefore, we'd like to actively compete in the emerging market.

For the mature market, we would like to change the product mix. In other words, the area that we are very strong at, the larger screen, then perhaps resources will be shifted in the developed market.

As for how we look at the price trend, I'm not able to talk about that, but the trend that we look at is a drop of the price. How far, we do not know. An average price because of the model mix change, we would like to have optimum regional balance.

Our interpretation, or focus of the next fiscal year onward, and when Mr. Hirai explained the TV business in corporate strategy meeting, and/or the earning release, even the sales does not increase. We would like to change into the structure conducive to profitability.

And, of course, the purpose is not to reduce sales, or not to reduce the volume and, therefore, next year, even if the volume is flat, we would like to achieve break-even. It does not aim at the balance based on a reduction of the sales; it's not our ultimate the purpose, that's what I'd like you to understand.

In that sense, even if the sales is flat, no growth, and if the price erosion continues, under that assumption, the volume is expected to grow. And under such conditions in next fiscal year, the unit price drops and volume increases, even though the sales doesn't increase. But even under such condition, we can secure the profit.

Katayama, Merrill Lynch. TV lost JPY27 billion less than the expected loss, and I'd like you to explain the breakdown. You overestimated the loss, or to what extent you did that, or structurally things are improving? So maybe in one quarter, JPY100 billion improvement might be achieved, but I think it's not likely. So out of JPY27 billion in certain quarters, how much improvement do you expect because of structural improvements by quarter?

Can I go one by one? First of all, I would not be able to explain in detail, but when I said that JPY175 billion we were actually in the midst of taking various measures. S-LCD joint venture was dissolved, but at that time, we were studying the possibility of dissolution, and partially, we were negotiating with the counterparty. But minus JPY175 billion, that number was actually explained at the beginning of December, after the second quarter was completed, and it was explained by Hirai.

But we were not sure that the S-LCD would be dissolved, because we were still negotiating. So the benefits from that was not actually explained because when we operating a plant, there's unutilized capacity and because it's joint venture, we have to compensate for the unutilized capacity portion.

In terms of panel, right now it's going to be switched to market-based price in procuring panels. And because we dissolve that joint venture, ever since fourth quarter we could see the improvement and benefit that this amounting to JY27 billion. In fiscal 2012, we continue to enjoy this benefit.

Yes, when we compare '12 to fiscal '11, the cost of panels will come down on a structural basis, and that benefit was enjoyed in the fourth quarter of 2011. And from this fiscal year onward, this benefit will continue.

But in your explanation, you said JPY87.5 billion was the loss you expected, but now Hashitani's answered the loss would be below JPY80 billion. So JPY27 billion of reduction, or [JPY2.7] --?

I talked about the unit numbers, and this will continue to the deterioration. And including that impact, I said JPY80 billion last year. First of all, JPY175 billion, that was the loss figure. But because of the dissolution of S-LCD, there has been an improvement that in the fiscal year '11, and this will continue and it will have a full impact in fiscal '12. And there are reduction of operations related to this, plus [also] there's a deterioration because of the reduction of the volume. And so including all these, I said JPY80 billion.

In fiscal 2012, we will not reach the break-even point, so there's a long way to go. But towards the break-even achievement in fiscal '13, I think we have made progress. The measures we have taken are showing good results, and the pace of progress is faster than we expected.

Based on that, we have profitability focused for fiscal 2012. It's not we just halved the loss, but we see good results of the measures we have taken in the past six months, and that is why, based on that, we came up with this figure.

Ono, Morgan Stanley. Just in regard to the insurance revenue and operating profit, purely based on operation, what would be the level? When you announced the forecast that the flood claim, the insurance claim revenue seems to be included in FY'12. If I may misunderstand, please correct me, and on page 4 and page 5 of your report, expenses related to that is about JYP27 billion; that is recorded. That is already offset by insurance payment; that is written. Is this a change from your previous statement, or that has been already incorporated into your account? The insurance claim payment additionally would be given during the FY'12, is that what you mean?

About FY'11, during the earning releases, we mentioned that and the payment is conducted as such, therefore, the insurance payment claim sum will be carried forward to FY'12. That's how we look at the payment, but how much exactly, that we are not able to disclose. But in terms of just the range, the three digit, or the lower range of three-digit number, billion.

So the actual loss is covered in terms of accounting, and so the actual, the profit itself, I think there is no change in terms of the lost profit.

Watanabe, Goldman Sachs. My question concerns Sony Mobile, and [just this case] of TV; this time while you are increasing the number of units shipped, what is the breakdown, high and low end, and medium? Also the regional breakdown, where do you expect to see the increase? Also the fourth quarter, this is a mixture of income in equity, and also, the full consolidation added in JYP25 billion, but going forward in the first quarter, what would be the likely timing of improvement for each quarter?

About the product model, mix, and composition, it is related to the product strategy, so I cannot go into details. But in terms of profit and loss for fiscal 2012, I mentioned that the major compression of the margin of loss, but we still see some red ink. Come fiscal 2013, we are making sure so that this business will contribute to the profit; that's our plan with the change of the management, and with 100% control of Sony Mobile Communication.

Starting from next week, the Corporate Executive Officer [SVP], Kunimasa Suzuki, will assume the position of President of Sony Mobile Communication. He already has started activities himself, but we will make all out efforts to improve the business in Sony Group. That's what I said during the corporate strategy meeting. Therefore, we will inject both human resources and other resources to achieve the expeditious turnaround.

So in terms of the timing of black ink, it'll be fiscal 2013. The specific numbers aside, there will a recovery in Europe, an expansion in Japan, and a plan to increase the market share in the United States.

For the fourth quarter with be 100% consolidation of the company planned, we provided reserve for inventories during the fourth quarter. So that aggravated the numbers to some extent and, therefore, it's not the simple multiplication of what happens during the last fourth quarter.

In view of time constraints, it is going to be one last question.

Yasuda, Ace Research Institute. The [logic of Vita], that's what I would I like to know. PSP track record is 6.7 million units, and PSP and Vita, and 6 million in PSP is normally declining. So the 10 million unit is what we project at this moment. With this into account, after the corporate strategy meeting, and there is a lack of strong motivation for development of Vita since then, and have you taken any measures in reaching the conclusion of those figures? Portable, the 60 million, the breakdown is not given.

About Vita, the last year 1.8 million units for all units, Japan, Asia, and Europe. As for starting the phase, I think it was a good start, and gained platform like Vita. The software is a key to success, how good software is, and that is the key to success in business.

So we have to reinforce the software area in order to improve the business, that is the basic line. Vis-a-vis Vita at this moment, there is no decline or lack of motivation as a portable platform. And also, in order to connect with the network, this is a very important product indeed for us, and therefore, we will have a very high motivation to develop this further. There is no change in software, in services, must be strengthened, and so in other words a collaborative approach is very important.

So with a third party from [First Party Studio], the titles will be presented one after the other, so please look at them and give your evaluation based on them. The volume is as you imagine.

Since time runs out, we'd like to conclude our earning release presentation meeting. Thank you very much to take time out of your very business schedules to attend this session. Thank you.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.