Strategy Informer  

There's a "huge impact" predicted to hit Sony's earnings, admits the corporate giant, no thanks to the European debt crisis hurting the value of the Euro.

They've got "no countermeasures" right now. Europe is Sony's biggest export market and now sales will be greatly weakened. It's fallen 11% against the Yen.


No components are bought by Sony from Europe and Asian suppliers are settled in US dollars, meaning they can't take advantage or limit the damage of the falling Euro, said Sony corporate treasurer, Hiroshi Kurihara. "There are no countermeasures that we can take for the moment,” he said. “There is a huge impact on our earnings.”

This creates an even bigger headache for CEO Howard Stringer who's been trying to cut losses where he can. Competitor Samsung meanwhile has been helped with a weakened won. Sony has closed down factories to try and stem financial bleeds.

"Even as companies take various measures against exchange rate fluctuations, it’s going to be tough for those with higher sales ratios in Europe,” commented Hong Kong-based RBC Investment Management Ltd.'s Yoji Takeda.

The fall of the Euro "is a problem for Japanese exporters.” The value of the 17-nation European currency has fell 11 percent against the Japanese Yen.

Will Sony raise prices to compensate? Not likely. "It’s difficult to raise prices in Europe due to the competition with Korean makers,” said Kurihara-san. “We can’t run away from currency risk as long as we sell overseas.” Meanwhile South Korea's Won has fell 5% against the Euro increasing their revenue from sales within the huge consumer market.

Source: Bloomberg