Sony facing its problems head-on by bringing down costs
Question: I am worried about my Sony Corp. stock. Do you see any kind of upturn ahead?
Answer: This is a trying time for the consumer electronics and entertainment giant.
Among its woes are the slow economy, a campaign of cyber attacks on the company’s online video game service, and supply disruptions caused by Japan’s earthquake and tsunami.
Longer-term, Sony must adapt quickly and effectively to shifting trends. If it can’t, it won’t be able to command premium prices, despite its premium-brand reputation.
The Tokyo firm’s results also are subject to the volatile effects of currency translation as well as the inherently uncertain performance of its motion pictures and new products.
Sony lost $3.1 billion in its fiscal year that ended in March — after a $439-million loss the year before — mostly because of the earthquake and the string of computer hacks that compromised customer information and caused a monthlong shutdown of the PlayStation Network game service.
The company’s sales totaled $86.5 billion in fiscal 2011, up 11% from fiscal 2010. Its share price sank 27% in the 2011 calendar year’s first half, which ended Thursday.
Also weighing on Sony’s results is a drop in sales at Sony Ericsson, a mobile phone maker that Sony owns in partnership with Sweden’s Ericsson. The joint venture has an aging product line, despite the recent introduction of two high-end Android phones.
Sony is facing its problems head-on. To bring down structural costs, Chairman and Chief Executive Howard Stringer has initiated layoffs and factory closings and dismissed some longtime managers.
Taking a page from Apple Inc.’s playbook, Sony has opened a retail location in Los Angeles that features a new design with brighter lighting and more open space. The design could serve as a template for remodeling the company’s Sony Style stores.
The stock’s consensus analyst rating is “hold,” according to Thomson Reuters, with three “holds” and an “underperform.”
American Funds Fundamental Investors more volatile than many of its peers
Question: Are shares of American Funds Fundamental Investors worth having in my portfolio?
Answer: More volatile than many of its peers that hold large-cap stocks, this fund isn’t for everyone. It owns a sizable number of energy and technology stocks and can invest more than one-third of its portfolio in foreign companies.
The fund’s “A” shares have gained 28% in the 12 months that ended Thursday, ranking in the upper one-third of so-called large blend funds, which buy both “growth” and “value” stocks. The fund’s three-year annualized total return of 1.3%, however, placed in the bottom third of the category.
The portfolio’s experienced investment team, led by James Drasdo since 1984, analyzes the financial results of companies to find undervalued stocks or firms with long-term growth potential that have been overlooked. The managers often let winning stocks ride for a while.
Industrial, energy, technology and financial services and healthcare made up the bulk of the $54-billion portfolio at the end of March.
The fund imposes a 5.75% sales charge, or load, on purchases of its “A” shares and requires a $250 minimum initial investment. The annual expense ratio for the “A” shares was last reported at 0.64%.
Andrew Leckey answers questions only through the column. Write to him at yourmoney@tribune.com.
