Monday, May 23, 2011
Hacker attack to cost Sony $172 million, almost as much as initial Japanese earthquake damage
Financially speaking, the effects of the hacker attack on Sony Corp. cost the Japanese media conglomerate nearly as much as initial damage from the country's devasting earthquake and tsunami.
The consumer electronics giant estimated Monday that it will have spent $171.7 million this year to repair the damages wreaked by hackers who infiltrated its computers and accessed the account information of hundreds of millions of consumers who used its PlayStation Network and Qriocity online services.
By comparison, the earthquake and tsunami on March 11 caused an estimated $208.5-million hit on the company's profit for the fiscal year ended March 31.
Largely because of the earthquake, Sony said it would have to take a non-cash charge of about $4.4 billion for its fiscal year for deferring tax credits in Japan. Sony amassed the Japanese tax credits over the last three years and had expected to use them over the next several years to offset profits it had projected prior to the earthquake.
But the disaster crippled the Japanese economy for years to come, making it unlikely that Sony would be able to make a profit in its home country, at least for the next year or two.
The one-time write-off wiped out $1.2 billion in profit that the company would have made in the fiscal year that just ended.
As a result, Sony said it is likely to report a $3.2-billion net loss for the fiscal year when it posts its quarterly and annual financials Thursday. Sony also estimated that sales would be $88.3 billion, or $233 million shy of the forecast it issued in February.
The loss would be the third consecutive year in which Sony failed to post a profit. The year before last, Sony reported a $500-million net loss on roughly $88.5 billion in sales.
This fiscal year, which began April 1, Sony will face the additional challenge of recovering from a broad attack on its computers last month, which exposed the names, addresses and, potentially, credit card information for millions of customers.
Sony said it expected the cost of rebuilding its computers, paying for credit protection services for its customers and compensation to customers, including free products and services, would be $172 million.
The estimate does not include potential liabilities resulting from at least two lawsuits filed by consumers who claim to have been affected by the attacks. Sony said the cases were in "a preliminary stage," too early to determine their probable impact on the company's financials.
Shares of Sony fell 46 cents, or 1.7%, to $26.59.