The fiscal third quarter for most companies ended September 30, a period that included only the very beginnings of the major financial upheaval.
Some key developments included Sony Ericsson posting a net loss on weaker sales and slowing consumer demand. Cost-cutting steps helped the mobile-phone maker lose less than expected; Sun Microsystems this week warned it would lose more than had been expected on lower-than-expected revenues; Yahoo will reduce annual operating costs by $400 million, including terminating at least 1,500 of its 14,300 employees. Several Wall Street analysts told CNBC they expected a larger cut, as much as 15%. The company reported a 64% decline in its profit for the quarter and flat revenue compared to the year-ago quarter.
Citing turbulence in the financial markets, HLTH and its 84%-owned subsidiary, WebMD Health, called off their recent merger agreement, while LG, the second largest maker of consumer electronics gear in South Korea after Samsung, reported its third quarter net profit dropped 93% compared to the year-ago quarter because of currency fluctuations.
Led by improved results in its mobile handset division, operating profit increased 58% and revenue increased 21%. LG said it expects its fourth-quarter sales and profits would likely show slowing growth. “The fourth quarter is the high season for displays and handsets, but the global economic slowdown is expected to impact our sales,” the company said. The company is considering more outsourcing to reduce costs and increase flexibility.
Trailing Best Buy and Wal-Mart as a retailer of consumer electronics gear isn’t paying off for Circuit City, which reportedly is considering closing 150 stores and terminating thousands of employees. The alternative may be to file for bankruptcy. Circuit City had sales of $11.74 billion in 2007, employs about 45,000 people and has 714 stores in the States and 772 stores in Canada. Once worth $5 billion on the market, its market cap is now a paltry $68 million.
Internet radio service Pandora has terminated 20 of its 140 employees, according to Wired. “Pandora is not immune to the challenges presented by the current economic turmoil,” said founder Tim Westergren. Looking ahead, Westergren sees better times. “Our listenership is growing rapidly, the Internet radio royalty rate resolution seems finally near, and the explosion of mobile devices like the iPhone are opening up a world of opportunity for Internet radio to expand off the desktop. Our ad sales are growing so well that, not only did we not make any reductions there, we need to continue to hire more,” he said.
NBC Universal will cut some $500 million – about 3% – from its 2009 budget, according to The Wall Street Journal. “We are living in a time of unprecedented economic challenges,” CEO Jeff Zucker said in a company e-mail. “It has become evident that the decline in consumer confidence and spending will impact our operations.” Most of the cuts are expected in staffing, promotional expenses and discretionary spending like travel.
Venture Wire reports that a number of VC-backed start-ups have begun cutting costs. They include Hi5 Networks, SearchMe, Zillow.com, Zivity, AdBrite, Jive Software, Redfin and Seesmic. The online video company Heavy has cut 14% of its employees. The online wiki provider Wikia laid off nearly 10% of its staff. Two WiMAX license holders in Bangladesh – M/s BanglaLion Communications and Brac BDMail Network – haven’t been able to pay the Bangladeshi government the required $31.3 million license fees by the October 16 deadline, according to Bdnews24.com. The government has extended the deadline to November 15, after which it could award the license to the next highest bidder.
Tellabs reported almost a $1 billion loss for the third quarter on a 7% decline in revenue. It said it would terminate 280 employees. It’ll de-emphasize its access-equipment business to focus on mobile backhaul, optical networking and business-services delivery. It will continue to support current and future access deployments that serve more than 700 customers.
CE maker Audiovox blamed the “deteriorating global economy” for a loss in its second quarter, which ended August 31. It said it would reduce its 880 employees by about 8% and expects a $6-million annual savings as a result. Earlier this year Audiovox acquired the US, Canada, China and Hong Kong consumer electronics audio-video businesses from Thomson for $19.7 million.
Texas Instruments will cut 650 jobs, saying orders were declining for chips such as those that are used in cell phones. Earlier in the week, the company reported third-quarter results that generally met analysts’ expectations. But that was for the quarter that ended September 30, when the economic crisis had just started.
NEC changed its full-year forecast for profit growth to a profit decline. It blamed reduced spending by phone operators and falling demand for electronic devices such as semiconductors.
For the quarter, Microsoft’s net income rose 2% on slowing revenue growth. The company cut its projections for the next quarter (its fiscal second quarter) and full year ending June 30, 2009. Sales at the division that produces Windows increased 1.9% but earnings declined 3.6%. Revenue at the server and tools division increased 18%. Revenue at the business division, which produces Office software, grew 20%. Revenue at its online services division grew 15%. A big but was revenue at the entertainment and devices division, which produces Xbox 360s and Zunes, were revenue declined 6%.
Sony blamed the economic turmoil and a strengthening yen for forcing it to lower the outlook for its fiscal year ending March 2009. It cut its forecast for sales of flat-screen TVs by 1 million units to 16 million and for compact digital cameras by 2 million to 24 million. The one bright spot is the PlayStation Portable: It raised its sales forecast by 1 million to 16 million, perhaps signaling that the boom in mobile devices is continuing. Sony said it will reduce capital spending, close plants and cut jobs. The company has been in a recovery mode for several years. It was counting on a profit recovery in its TV and PlayStation operations but now says they won’t be in the black this fiscal year.
Anyone thinking that the economic turmoil won’t impact makers of luxury goods should consider Denmark’s Bang & Olufsen, which makes high-end audio and video gear. It will cut 300 jobs and exit the mobile handset and MP3 player markets. The company left its guidance for the full year unchanged. It had updated guidance after first-quarter sales dropped by one-third. The company said it would continue adding B1 franchise stores that sell only or mostly its gear. The company’s least expensive 40-inch TV goes for $15,000. It positions itself much the same as Harley-Davidson in the motorcycle industry or Porsche in the car industry.