Sony Corp. F3Q10 (Qtr End 12/13/09) Earnings Call Transcript

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 |  About: Sony Corporation (SNE)
by: SA Transcripts

Sony Corp. (NYSE:SNE)

F3Q10 (Qtr End 12/13/09) Earnings Call

February 04, 2010 8:30 am ET

Executives

Sam Levenson - SVP, IR

Nobuyuki Oneda - Executive Deputy President & CFO Sony Corporation

Robert Wiesenthal - Group Executive, Corporate Development & M&A, Sony & EVP & CFO, Sony Corporation of America

Gen Tsuchikawa - Senior General Manager, IR Division

Analysts

Daniel Ernst - Hudson Square Research

Yuji Fujimori - Barclays Capital

Kota Ezawa - Citigroup

Jason Mauricio - Arete

Mark Harding - Maxim Group

Presentation

Operator

Good day and welcome to the Sony Corporation third quarter fiscal year 2009 Financial result conference call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). I’ll now turn the call over to your host for today's call Mr. Sam Levenson, Senior Vice President of Investor Relations at Sony Corporation of America. Please proceed.

Sam Levenson

Thank you very much for the introduction [Akita]. Good evening from Tokyo and thank you all for joining us today February 04, 2010 for the discussion of Sony's third quarter’s results. I am Sam Levenson, Senior Vice President of Investor Relations at Sony Corporation of America and with me on the conference call tonight, is Nobuyuki Oneda, Executive Deputy President and CFO Sony Corporation, Masaru Kato Deputy CFO at Sony Corporation, Robert Wiesenthal, Group Executive, Corporate Development and M&A for Sony and EVP and CFO Sony Corporation of America and Gen Tsuchikawa, Senior General Manager of the Investor Relations Division. Thank you all very much for joining us. In just a few moments, we will review today's announcement, then we'll be available to answer your questions.

Please be aware that statements made during the following remarks in Q&A session with respect to Sony's current plan, estimates, strategies, press release and other statements that are not historical facts are forward-looking statements about the future performance of Sony.

These statements are based on management's assumptions in light of the information currently available to it and therefore, you should not place undue reliance on them. Sony cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements. For additional information, as to risks and uncertainties, as well as other factors that could cause actual results to differ, please refer to today's press release, which can be accesses by visiting www.sony.net/ir.

With that, I'm now going to turn to today’s announcement.

I will begin by briefly summarizing the financial results and other key developments during the past quarter. We will also touch upon the key questions raised earlier today, when we hosted our regular earnings press conference and investor meeting here in Tokyo. Let me remind you that a web cast replay of the investor meeting along with the slides presented at that meeting, and our detailed earnings release are available on our website for your access.

During the third quarter the company continued to successfully execute on each of its major initiatives and operating profit for the quarters substantially exceeded our plan as announced in October. Excluding restructuring charges and equity in affiliates, our operating profit for the third quarter was 165.5 billion yen as compared with 4.8 billion yen in the third quarter last year. All of the Company segment except all other recorded improved operating results year-over-year.

Due to the better than forecasted results and after review of our outlooks for the balance of the fiscal year, we have again upwardly revised our full year outlook for operating loss from a 60 billion yen to 30 billion yen. This 30 billion yen improvement is comprised of 25 billion yen improvement in Consumer Products and Devices segment, 25 billion yen improvement in the Financial Services segment, a 10 billion yen decrease in forecast in the B2B and disc Manufacturing segment and a 5 billion yen decrease in each of the pictures and NPS segments.

During the quarter we continue to make significant progress in substantially reducing inventories and timely managing receivables and payables As a result, our cash flow has continued to improve. We are very pleased to share with you that Sony expects positive cash flow from operating investing activities combined excluding the Financial Services segment’s activities.

With respect to the structural transformation process that we initiated earlier this year, we continue to make progress there as well. We remain confident that we will achieve the targeted 330 billion yen in annual cost savings, and we remain on track to achieve a 20% reduction in procurement cost as compared with 2008 levels.

Our process of consolidate manufacturing facilities is running well ahead of plan. As a reminder, we started the year with 57 plants and the goal of reducing them by 10% or 6 plants. By May 2010, we anticipate a reduction of 12 plants, twice our initial target as we have identified additional opportunities to shrink our operations. So, to put it simply we are either on plan or ahead of plan for each of our key strategic initiatives.

Before we turn to your questions let me briefly discuss a few developments in each of our key businesses during the quarter. In the Consumer Products and Devices Segment, sales decreased 11% driven largely by price declines in TVs, system LSI and optical pickups. However, due to aggressive cost reductions and improved cost to sales ratio and the positive impact of exchange rates, operating income improved 69 billion yen, year-over-year. A particular note this quarter was at the TV business achieved profitability.

In the Networked Products and Services segment, we recorded a slight increase in sales year-over-year. The operating income improved to 19 billion yen as compared with the 6 billion yen operating loss in the same quarter last year, primarily due to improvements in VAIO business. In the game business, operating income was of approximately 15 billion yen was recorded which is roughly flat with the prior year period. While game sales declined 4%, we were able to offset that through lower manufacturing cost in SG&A. PS3 hardware unit sales increased 44% to 6.5 million units in the quarter.

Year to date, we sold 10.7 million units of PS3 and we remained on track to achieve our goal of 13 million. For the quarter, both PSP and PS2 recorded lower unit sales as compared with the prior year. For the year, PS2 unit sales are expected to exceed our prior estimate and PSP unit sales are expected to fall short of our prior estimate. In the B2B and disc manufacturing business, increase sales of Blu-ray drove over an increase in the disc manufacturing business. However, this was more than offset by decline in the B2B business.

As a result, sales for the segment decreased 1%; however, operating profit rose 21% to over 10 billion yen, primarily as a result of the higher disc manufacturing sales. In the picture segment, higher theatrical, home entertainment and television revenues drove sales up by 16%. On a U.S. dollar basis, sales rose 25%. The quarter benefitted from the strong theatrical performances of 2012 in the Michael Jackson movie - as well as significant sales in home entertainment of Angels and Demons and Terminator Salvation. Operating income rose 9% as the benefits from increased sales were partially offset by the theatrical underperformance of one title and the write-off of certain development cost.

The music segment also benefitted from the Michael Jackson movie sound track as well as the breakout performance of the first Susan Boyle’s album. Sales rose 2% and operating income rose 8%. As the company benefitted from aggressive cost reduction and lower restructuring charges. Finally, the results of the financial services segment were quite strong. Revenue doubled, year over year, due to an increase at Sony Lifes. Operating income of $35 billion was recorded as compared with an operating loss of 37 billion in the same quarter of the previous fiscal year.

In this year’s quarter, the Japanese stock market rose 4% whereas in the last year’s quarter, it failed 21%. This had a positive effect on our results as remarked to market certain securities in the portfolio at Sony Life. In summary, as was the case in the second quarter, the most significant upside to our earning forecast of the year comes in the consumer products and devices and from the financial services. While the forecast of loss to the year has improved from our initial estimate of 110 billion yen loss back in May last year to a 30 billion yen loss today. We will continue to try and achieve breakeven operating results this year. With that, we will be happy to take your questions.

Question-and-Answer Session

Operator

(Operator’s Instructions). Our first question comes form the line of Daniel Ernst with Hudson Square Research. Please proceed.

Daniel Ernst - Hudson Square Research

Yes. Good evening and good morning and thanks for taking the call. Two sets of questions. First on the PlayStation grew. On the last call, I believe you said you’re operating an around 10% negative margin on PS3 unit and want to know where there trended now and where you would like to get to by the end of the year assuming prices stay where they are and I assume be working on cost reduction and then also on the PlayStation, is this you had a 44% increase in PS3 unit sales, but only a 17% increase in PS3 software unit sales and getting a lower attach rates for games and once, you know, what your thoughts contributes to that and what your outlook is going forward now that the PlayStation install basis is certainly growing but software follow-up versus on the TV business.

Nobuyuki Oneda

This is Nick Oneda. I will answer the first question. Currently we are expecting the negative margin for the PS3 would be around 5 or 6%. So which is on target basis and then sometime in next year will be positive by, you know, the margin from the PS3 hardware. Because we are expecting that we are going to use the 45-nano LX, you know, the key devices and that will help to reduce the cost for another material. That is the main reason of the positive margins for the next year. So, this is the, you know, answer to the first question. I think that the PS3 unit sales - high ratio was is not so bad as we originally expected. The high ratio now is about for PS3 is 7.8 and the so far the PS2 is about 10.5 or 10.6, but considering the timeframe since we introduce the product, 7.6 high ratio is not so bad yet.

Daniel Ernst - Hudson Square Research

Okay. And then on the TV business, you had slight profit in TVs in the quarter, I think first time in sometime. And wants to know what your thought contribute to that and then you know, looking ahead, do you think that is sustainable and more importantly can you start to actually grow profits in TVs?

Gen Tsuchikawa

See, third quarter is one of the reasons of profitability - that is the profit operation for the third quarter is that the seasonality wise, there is the highest quantity of sales session out of the expected 50 million units, we sold about 5.4 million sets within the third quarter. So usually the third quarter shows the better number because of the quantity increases that is number one, but another thing is the price itself. We expected the some, you know, the deterioration during the third quarter, but fortunately that deterioration was not so big as we originally expected, that’s the second thing.

Third thing is the, our cost reduction efforts particularly for the fixed cost expenses was positively impacted to our both of number, particularly for the TV businesses and also the cost reduction of the material is on schedule, may be a little bit ahead of that. So, for those reasons our profitability over the TV was good in quarter 3. Is it sustainable or not - the next fiscal year, you know, next quarter, we are taking the some negative number because of the fourth quarter is usually the less quantity and also we are taking some conservative positions in terms of the price deterioration because we didn’t expect - we didn’t see any big price reduction within third quarter, but we are still taking some cautious position that the fourth quarter price deterioration might happen.

So, may be the fourth quarter is negative number, but the coming fiscal year, we are expecting that we could be the profitable operation because we expect more quantity in the next year compared to this year which is about the 20 million plus number next year. That will help and also the products, you know, the competitiveness is better than the last year, fiscal 2009, because we are going to introduce the more LED backlight products. Last year we only have the 4% of our total products, has the LED backlight products and we will also increase the 3D quantities, probably allowing 10% for next year and we also increased the IPTV you know, function TVs for next year so there are many improvement over the product competitiveness in next year so we are hoping that next year for the VDA some profit from the TV business next year.

Daniel Ernst - Hudson Square Research

Thank you for cover up but just last question, in the restructuring, I think from 2004 and 2005 period in addition to among many things you did in cost reduction efforts and just to the plan closure, you also had a target to Q-count reduction and you look across the competitive landscape of electronics only successful firms, although smaller like Apple who are going fast have much fewer price. Samsung seems to have fewer and fewer price every year, what your current thought on Q-count reduction or not is today?

Nobuyuki Oneda

We don’t have any drastic deduction of the SQUs next year, but one thing I can clearly say is the SQU for the telephones would be drastically reduced for the coming fiscal years, but not some much for other you know the product at this moment.

Daniel Ernst - Hudson Square Research

Understood. Okay thank you very much for your time.

Operator

Our next question comes from the line of Yuji Fujimori with Barclays Capital. Please proceed.

Yuji Fujimori - Barclays Capital

Hello. Thank you very much for taking my questions. First of all let me ask about the inventory conditions. However, the inventory well managed at the end of Q3, how exactly did you calc the inventories. Could you explain with more details and secondly could you explain about the progress of cash conversion improvement projects, I guess starting from last summer and also secondly in terms of TV affiliation, could you give us a guidance of the TV operating losses on the full year basis. If you could give me the exact range of the amount and also finally it looks like the Q3, you know, TV improved by 48 billion yen and to get better sense for next year this business, if you can give us some kind of breakdown such as fixed cost reduction or marginal profit rates in the improvement, that kind of breakdown if we have, it will be very helpful for us.

Gen Tsuchikawa

Okay. Your first question is the inventory (inaudible). Basically we didn’t change any systems, we didn’t changes any processes. What we did was the taking the leadership by the top management including myself and also the (inaudible) who is responsible for the monitoring, you know, the operations and the supply chain operations. We are pushing the operational people to watch for the inventory very carefully and then do not by any excess, you know, the materialist or do not pile up with the inventories more than what we requested or what we have ordered. This is the kind of the management strong, you know, the directions that brought this inventory level drastically.

Of course, for the next step, we really have to review the overall system improvement and then the reduce the overall supply chain more systematically but so far during the last several months, our success was more, how to say, strong direction from the top management. That is the reason why we could, you know that this inventory this fiscal year. And cash, the conversion improvement project, of course one of the important thing is the inventory in our case because we had the very big inventory for the beginning of this fiscal year and second thing is our payment time is usually faster than where you know correction, I mean the account receivable correction time.

So, we are now negotiating with our suppliers, at least at the correction timing and the payment, the timing should be equal or possibly the payment could be stronger than the correction and the receivable correction timing. And also we are pushing the operating units to review the investment and to really carefully watch the need of the investment and those are the main actions that we are doing for the improvement of the cash conversion cycle. Your third question is the full year TV. We are still loosing money because of particularly the first half. We lost the big money and that the third quarter even though we did successfully achieve the appropriate number, but we are taking some reasonably conservative positions for the fourth quarter. So, the guidance is still 2009, two year basis (inaudible) situation.

Yuji Fujimori - Barclays Capital

The previous guidance was I guess 80 to 90 billion losses on the three year basis. So, the CPD segment was revised up by 25 billion yen. Is that the most (multiple speakers).

Gen Tsuchikawa

Yeah, I think that the VAIO, you know, the latest forecast is somewhere around the 500 (inaudible) you know, the loss of the TV business. I said the last time is probably 700 or 800 (indiscernible), but because of the third quarter improvement, I think that loss could be reduced by 300 (inaudible) compared to the last time.

Yuji Fujimori - Barclays Capital

Right

Gen Tsuchikawa

This is Tsuchikawa. Just to correct what you said the 45 billion yen improvement in Q3 is not just TV but it is whole consumer products division.

Yuji Fujimori - Barclays Capital

Right.

Gen Tsuchikawa

And the Q3, you know, the improvement factor compared to the October forecast is coming from the - one is the price deterioration was not so severe compared to that of our plan. Number 2 is the fixed cost reduction therefore and the monitor cost, you know, was done successfully. I think those are the main reasons of the movement in the third quarter, you know, TV business.

Yuji Fujimori - Barclays Capital

Okay.

Operator

Our next question comes for the line of Jessica Cohen with Bank of America/Merrill Lynch. Please proceed.

Jessica Cohen - Bank of America/Merrill Lynch

Thank you. I have a couple of questions on the entertainment side. First of all on home video, the trend seemed better in this past quarter, the Q4. I am just wondering if you could talk about how much you think the problems in the last year or so have been secular. How much is (inaudible) and well lets over that one.

Robert Wiesenthal

Okay, its Rob Wiesenthal speaking. I think you’re right. We are seeing definitively signs of stabilization and improvement in home video over the fourth quarter. You see it was very difficult that you can imagine last year to this aggregate the impact of piracy versus shifting consumer taste and the economy. So, I guess, I would say that clearly part of it was the economy and I think that’s what we are seeing in terms of the stabilization and also I think, you know, the pick of a Blu-ray and the dedication of retail of shelf space for Blu-ray and the proliferation of lower cost Blu-ray players has really helped that.

Overall, we are performing better than the rest of home entertainment industry year over year. Retails are about down 6% in terms of unit, 6-7%, and we are probably about 2.9% and that has been through promotion and the (inaudible) catalog and having a lot of new strong releases like Pineapple Express and others. But I think you are right Jessica. There definitely seems, we are seeing some stabilization here in retail on (indiscernible).

Jessica Cohen - Bank of America/Merrill Lynch

And then as you look out Rob, how big you think Blu-ray will be of total either for you or for the industry and can you talk about what your expectations are for video and demand. I mean it seems like there is a bigger focus by the industry finally. When does it seem to be moving up with that. You know, is it something that exciting to you. Do you think there is marketing support behind the cable operators?

Robert Wiesenthal

Just a follow up on home video questions one more thing in addition to those already titled (inaudible) was a very big part of that. In term of Blu-ray, it is still only about 6% of transactions and about 8% of overall value. Again, I think as these - obviously there was, you know, we’ve been feeling the impact of economy in terms of first thing behavior, but these players continue to proliferate, we continue to have high expectations for Blu-ray.

With respect to video on demand, there is a lot of experimentation going on in the industry in terms of looking at windows, looking on alternative forms of distribution, both in terms of cable and also directed TV, IPTV, we did our second venture into testing of straight IPTV titles which was directly to (inaudible) TVs which was successful.

We would like to see the same thing on cable. You obviously need to get the FCC waiver taking care of to block the digital, the analog out on the television set, but we would like as much of this has happened across all platforms and not only direct IPTV, cable, but also to play station and other types of platforms. The cable operators and satellite operators are willing to give support to this type of these services and they have been pretty constructive. And I think you are going to see a lot more aggressive experimentation over the next by everybody.

Jessica Cohen - Bank of America/Merrill Lynch

Right and then I believe one last question is on music. Can you bring out how much, you know, what the improvement to do lower restructuring cost. Can you just bring out what was restructuring in the quarter?

Robert Wiesenthal

I am sorry Jed, can you repeat the question?

Jessica Cohen - Bank of America/Merrill Lynch

Was the improvement in operating income due to lower restructuring cost, can you give us, you know, what restructuring cost were in the quarter and then any kind of album you can give on both music and film would be great?

Robert Wiesenthal

Okay. In terms of music, I mean, I think a lot of its captured by the press release, a lot of really was on the sales side, we choosing for well about $8.0 million units in the quarter and Michael Jackson in terms of this is debt about $4.2 million. It was very little recorded during this quarter in terms of restructuring, I think that we are seeing the benefits of restructuring in the past really comes at the bottom line in terms of maintaining a very, very strong margin. We have been very much ahead of the curve at our music company in terms of right sizing our platform for the current environment and what really we had a lot of hips to go along with it, so we feel like we are in pretty good shape there.

Jessica Cohen - Bank of America/Merrill Lynch

Okay, thank you.

Operator

(Operator Instructions). Our next question comes from the line of Kota Ezawa with Citigroup. Please proceed.

Kota Ezawa - Citigroup

Hi, good evening. I have got two questions. The first one question regarding the third quarter actual operating profit which was pretty high. You mentioned in briefing in Tokyo the third quarter operating profit exceeded internal budget by 100 billion yen and inside of this one to billion yen you mentioned in the 45 in CPD, 15 in NPS, 10 in entertainment, 15 a non-shows and perhaps 15 in all those. The question is actually that how big amount in this 100 billion yen we got as continuous affect in the future. I had the first query in the CPD is managed by CD pricing so that we should have undergone all of 45 it continuous in the coming future, now financial and entertainment music I think the portions mainly temporarily improvement so not a continuous and this really what you are thinking or is to rethink those are partially continues? This is the first question.

Robert Wiesenthal

We have one just clarification, Jessica if you are still on the line, in terms of the retail industry being down about 6.6%. This is true. We were in fact up 2.9% not down 2.9%, so please accept that correction my apologies. Sorry.

Gen Tsuchikawa

Yeah, Q3, you know, of course as I said that is long side on the (inaudible) I had the forecast which was made in October but this is also the timing issues too as I mentioned that the fourth quarter we are taking some consultative positions that once and will be offset partially in the fourth quarter. The one of main reason that price deterioration that we expect being third quarter was not actually happened, so we are still anticipating or expecting that the price deterioration might happen in the fourth quarter and the other thing we are thinking is, we are cutting the advertisement promotion expenses for the third quarter or even the first half of this fiscal year but because of the new products introduction for the spring time, we would like to expand the some, you know, the additional marketing and that’s advertising and expenses so within the fourth quarter. So that product be a 100 billion effect will not continue before the coming fourth quarter.

Kota Ezawa - Citigroup

Okay. Can you regard, you know, even partly in this 100 billion yen is thanks to all fixed cost cut or the you know, the structured change on that we can think the profit might be?

Gen Tsuchikawa

Yes, yes. The pricing or the deterioration is one factor the other factor is of course the you know, the cost cutting effort for the transformation and then of course that the material [cost] speed action which we are expecting 20% in direction within this fiscal year. Those kinds of things actually contributing the profitability over the third quarter, yes.

Kota Ezawa - Citigroup

Okay, my second question is for operating profit year on the fourth quarter and full y ear March 2010, you mentioned in a briefing that internal operating profit target is breakeven rather than minus 30 billion yen, you mentioned today. Could you answer which business can show better margin to realize this breakeven and what’s the reason behind? Believe TV is promising to show another bid in the fourth quarter but if there is any other business or issue I would like to hear about it, thanks.

Gen Tsuchikawa

The generally speaking that the old Eric Sonics you know the segment, probably have some chance to improve the profitability compared to the official announcement of the 300 you know, the 300, you know deficit, the main reason is the, we are not sure whether that the price deterioration may happen for the fourth quarter or not. So, this will impact near 200 to 300 (inaudible) and if the price deterioration does not happen then we would be very close to the breakeven. So, mainly the opportunity comes from the electronics businesses.

Kota Ezawa - Citigroup

Do you mean that the 30 billion yen of 300 (inaudible) difference is mainly almost all about TV pricing situation, or is there any other issues?

Gen Tsuchikawa

Yes, out of 300, little by over 100, price deterioration comes from the TV, and other is from the digital still cameras. On the other electronic products, also, we are countering some price deterioration for the fourth quarter.

Kota Ezawa - Citigroup

Okay, this is great. Thank you very much, and congratulations for the good numbers for the third quarter. Thank you.

Gen Tsuchikawa

Thank you very much.

Operator

Our next question comes from the line of Jason Mauricio with RA. Please proceed.

Jason Mauricio - Arete

Hi. Thank you very much. I was wondering if you will be going to more detail on the digital still camera business. You mentioned, revenues were down, but profitability was up as you could talk through the reasons why the revenue was down, whether it is AST production or share loss and what were the reasons that you had that the profitability was up

Gen Tsuchikawa

Yeah, the status quantity surfaced up, but the price deterioration is bigger than the quantity increase impact. So the profitability wise we are better than what we expected is the couple of reasons. One is the fixed cost reduction and also the, second thing is we are using the more how to say, the outsourcing, you know, resources for the assembly operations. So, those are the main reasons and also the same as the TV operations, the price deterioration was not so bad compared to what we expected.

Jason Mauricio - Arete

And on video cameras, is this a matter of waiting for the new models to come to market before profitability can improve or we seeing some structural issues there that are separate from cameras given profitability did not improve?

Gen Tsuchikawa

Yeah, in the case of the camcorder the market itself, is as you know it is shrinking so therefore that the overall, you know, the sales and the absolute number will be profit, may be less than previous year. However, the profitability itself even though the diversity of the amount, so may be, you know, deteriorating, but the profitability itself led us to maintaining the same level as before so therefore what we have to do is to increase the new market share for the time being and the next step is of course that we have to do some, you know, the new products value, no, introduction yes.

Jason Mauricio - Arete

And my final question is on Sony online services and yes then, the entirety of your constant delivery system, you spelled out very clearly how you see that as a revenue driver going forward, however, I was wondering if from a corporate standpoint you are looking at these services whether at IP TV to the television set or PlayStation network on contents or video delivery are these, can this be a profit center for Sony in the future or is this carried to get consumers to buy your hardware.

Gen Tsuchikawa

We need both. And it’s just going to take time, you know, we have already set forth the strategy of the migration of the PlayStation network to Sony online services to go across all our platforms and obviously, given the competitiveness in the CE business we are going to need that extra revenue string that’s going have to profitable one too.

Operator

Our next question comes from the line of Mark Harding with Maxim Group. Please proceed.

Mark Harding - Maxim Group

Okay, thank you for taking my question. Specifically I wanted to sort of focus on the TV pricing, you h ad mentioned that the price erosion perhaps more benign this quarter what gives you confidence or what makes you think that going into the fourth quarter prices are going to or price declines are going to accelerate. I was wondering, you know, both on a specifically, I guess on a regional basis as well.

Gen Tsuchikawa

Yeah price declining for the fourth quarter is in slightly up through the competitor situations too. Of course that we have the reasonably low inventory level in both all kinds of business also the market, you know, the inventory level too. So therefore we don’t expect the you know, so much you know, the plus adjustment within this fiscal year and also the, you know, product value, you know, the competitiveness is better than the fiscal 09 motto. So that is the end of great chance that we don’t have to pay so much you know, the cost for the price adjustment.

Mark Harding - Maxim Group

Okay. And then if given the fact that the pricing environment was relatively benign. Was there anything that perhaps held back market share gains this last quarter on the TV side?

Gen Tsuchikawa

Well, I don’t see any big in the market share increases within this fiscal year. Allowing 10% because we still, you know, the shooting for the about 50 million of sets within this fiscal year. That is about 10% of the market share, which is about 2.8 or 2.9% lower than the last year, but next year, you know, because of our new products, the competitiveness and also we are expanding our business in the developing countries by using the OEM or ODM type operations. We are trying to sell more than 20 million sets next year. In this case, our share will be increased. That our, you know, the expectation is at this moment.

Mark Harding - Maxim Group

Okay. Great. And then I guess also taking a look at the regional demand. When you look out for the rest of 2010, can you give any sense of how you see the demand environment?

Nobuyuki Oneda

Excuse me. Just don’t understand the question. When you say regional demands?

Mark Harding - Maxim Group

Well looking at U.S., Europe, Asia, are you seeing any pockets of weakness going forward for the rest of the year.

Gen Tsuchikawa

Yeah. We have some, you know, tough situation in Europe. And because of the competition with the Samsung or the LG is taking, you know, very strong position in Europe. But we are relatively okay for the China or the Asia, you know, with those areas. So, I think that depending upon the area that is slightly different, but except for the Europe, I don’t think any big weakness in other areas.

Mark Harding - Maxim Group

Okay fair enough. And just lastly, if I could, I know you touched on it on the earlier call. There was a discussion about anticipated restructuring cost for the upcoming fiscal year. Can you give us any color around perhaps the restructuring plans for fiscal 2010.

Gen Tsuchikawa

Yeah. We are still in the middle of the restructuring process which was announced in the fiscal year 2009. Because of some of the shutdown of the plants may continue, even for the fiscal year 2010 and also some of the peoples, you know, the deduction is still planned in some of the operating units. So, therefore the fiscal year 2010, I think at least 500 (inaudible) plus may be required to do the restructure.

Mark Harding - Maxim Group

Okay. Great. Thank you very much.

Gen Tsuchikawa

Thank you. Akita, we had time for one last question, please.

Operator

Our final question will come from the line of (inaudible). Please proceed.

Unidentified Analyst

Thank you guys for taking my questions. Just to follow-up on the restructuring. You said that 50 billion for the next fiscal year. My understanding was that this fiscal year restructuring was focused more on headcount reduction as well as consolidating from manufacturing plant. I know you cannot go into specific details, but can you give us a sense of what further restructuring is required for the next year?

Gen Tsuchikawa

Well. In the next fiscal year, as said, we would need more than 500 (inaudible) or plus. Usually the 6% of the restructuring cost is coming from the peoples deductions. You know, 40% is usually relating to the, you know, the machineries or building motivation.

Unidentified Analyst

So, next year, you still plans to cut more headcount?

Gen Tsuchikawa

Yes. We have to cut some of the employees, yes.

Unidentified Analyst

Okay, great. And then also wanted to get a sense of the TV profitability in Q3 by geography - has had that November TV was breakeven here in the U.S. Wanted to get a sense of what was profitability across the different geographies.

Gen Tsuchikawa

We cannot disclose the profitability by region basis. So, please excuse me to disclose this profitability by regions.

Unidentified Analyst

Can you comment whether all regions for TVs were profitable?

Gen Tsuchikawa

No. I think the high competitive market, you know, we are not making money. For example, the U.S. is one of the typical cases and also the Europe is another unique cases.

Unidentified Analyst

So U.S. and Europe did not make money in TVs in Q3?

Gen Tsuchikawa

Oh! Q3, I was talking about the annual basis.

Unidentified Analyst

No, I was referring specifically to Q3 because your TV (multiple speakers).

Gen Tsuchikawa

Yeah, Q3, specific, you know, I don’t disclose, I couldn’t disclose.

Robert Wiesenthal

Then we agree to disclose what are not TV game are profitable until they get back into a profitable basis for full year but we are not going to give quarter by quarter and region by region breakdown.

Unidentified Analyst

Okay, fair enough. And then also on - based on your comment earlier for Q loss for the fiscal year of about minus 50 billion yen that would imply that Q4 or Q loss are around almost 40 billion, how much of that loss in Q4 that you are assuming comes from lower unit volume scale versus pricing?

Robert Wiesenthal

You are comparing the third quarter to fourth quarter?

Unidentified Analyst

That’s because you said earlier that your previous plan for fiscal year Q losses was about minus 70 or minus 80 billion, now you think is going to be more like minus 50 billion and that would imply that Q4 loss is about minus 40 billion. So was just curious how much of that 40 billion that you are assuming for Q4 comes from lower unit volume scale versus lower pricing?

Robert Wiesenthal

I mean, this is fiscal, I mean, as we mentioned that, I mean, we have set up roughly 20 billion reserves, I mean, for EPD business and some part of that is TV and basically that’s due to potential pricing decreases and other succinctly additional add and pro that we may use and that’s as much as we have disclosed on this issue.

Nobuyuki Oneda

We can take the detailed questions in the New York office. We are going to end the call there. Ok, thank you.

So, we want to thank everybody for participating tonight, and please feel free to call the New York, London, and Tokyo IR teams with any further questions which you may have. Thank you very much

Operator

This concludes the presentation, you may now disconnect. Good day.

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