Sony warns of expected £1.97bn financial hit from earthquake and data breach

Sony has warned shareholders that an expected quarterly profit has turned into a projected ¥260bn (£1.97bn) loss.

The company said that damage from the earthquake and tsunami in Japan had brought on huge losses, and that the electronics firm is preparing to take a major financial hit.

The majority of the losses come from a ¥360bn non-cash charge the company has allowed against tax assets due primarily to lost income attributed to the disaster and its effects on the industry.

Sony estimates that the earthquake has lowered sales by ¥22bn and operating income by ¥17bn for the fiscal year ending March 2011, and that the firm will lose ¥150bn in total operating income for the fiscal year ending March 2012.

Meanwhile, the cost of the PlayStation Network data breach in the coming financial year is expected to reach ¥14bn (£106m) after new security protection, user support, cost discounts and legal bills.

The earthquake and hacking incident have compounded an already rough financial period for Sony. The company lost its edge in the home entertainment and consumer electronics spaces, and analysts are expecting an executive shakeup.

"Sony infighting and bad decision making crippled the company so it lost critical markets to Apple, Nintendo, Microsoft and Samsung, leaving the once dominant consumer electronics company a shell of its former self," Enderle Group principal analyst Rob Enderle told V3.co.uk.

"The organisational structure and leadership in Sony isn't working. It desperately needs someone with a strong turnaround skill set and the authority to fix the company, otherwise it is likely to continue to slide in the wrong direction."