Sharp to post its first ever annual financial loss

Blaming dramatically falling prices on LCD TVs, Sharp today warned that it will report its first annual operating loss ever at the end of March.

From October through December 2008 -- three months in the Japanese-based electronic maker's third fiscal quarter -- Sharp posted a loss of 65.8 billion yen, in comparison to a $29.5 billion profit for the same period the year before.

"The decline in LCD-TV prices was so steep that it pushed our business into the red, and was so sharp that our cost-cutting efforts couldn't keep pace," Tetsuo Onishi, a Sharp director in charge of finance and accounting, reportedly told journalists in Tokyo.

As an additional cost-cutting measure, Sharp now plans to cut about 1,500 temporary jobs.

Sharp predicted this week that although the number of its LCD TVs sold will rise 21% this year to 10 million, sales revenues from the sets will drop 10% to ¥730 billion. In stark contrast, Sharp forecast about a year ago that sales revenues from its LCD TVs should increase 17% during the then upcoming fiscal year, to the tune of ¥1 trillion.

Meanwhile, sales revenues from Sharp's digital cameras declined 26% in the nine months ended December 31, and are expected to fall 32% to 201 billion yen for Sharp's entire fiscal year. Sharp's overall sales for the fiscal year will probably fall about 15% to ¥2.9 trillion, instead of the previously forecast ¥3.42 trillion, according to the company.

Sharp anticipates that the fiscal year ending March 31 could end with an operating loss -- representing revenue minus administrative expenses and the cost of goods sold -- of ¥30 billion.

The annual operating loss will be the first recorded for Sharp since shares of the company's stock first got traded on the Tokyo Stock Exchange 52 years ago.

Sharp is also the biggest shareholder in flat-panel TV manufacturer Pioneer, holding 14.3% ownership. Pioneer's shares fell 84% in 2008.

Sharp's earnings were also negatively affected by valuation losses on its securities holdings, plus a $120 million fine for allegedly taking part in a price-fixing cartel on LCD panels.

A further adverse impact will be felt from Japan's firmer yen, according to financial analysts. In contrast, Korean-based competitors such as LG and Samsung are enjoying a softer won.

In a revised industry forecast issued in December, analyst firm iSuppli predicted that global shipments in the LCD TV category will continue to grow in 2009, due to a combination of "strong consumer interest" and declining Average Selling Prices (ASPs) for sets. At the same time, though, iSuppli lowered its original forecasts for industry-wide LCD TV shipments by 10% for 2009, to 112.6 million units instead of 124 million units.

The analyst firm also estimated that global shipments of LCD TVs would amount to 93.4 million units, down almost 6% from its previous prediction of 99 million units.