The resolution by Sony Corp. to take a write-down of about $1-billion on its movie business is an exceptional move for a leading Hollywood participant which showcases the intensifying financial hurdles facing the long-time Culver City studio.
On Monday, the Tokyo-based entertainment and tech giant stated that it made the drastic changes after gauging the numerous future benefits of the movie business, which has failed to keep up with its peers in the recent past as it strived to come back from an immense cyber attack in 2014. The non-cash charge will be published as a running loss in Sony’s fiscal third quarter that ended in December.
The revelation comes exactly two weeks after the company reported that Michael Lynton, the Chief Executive at Sony Pictures Entertainment, will resign from his 13-year job. This decision followed a series of disappointments to executives at the Tokyo mother company by Lynton, as he couldn’t deliver his duties as expected. In November, Sony lowered its entire year profit predictions by 23% to nearly $259 million, for the TV and film studio.
Sony has received lots of criticism, with shareholders reacting negatively to the write-down that was reported on Thursday, prior to the Sony reports earnings. The company’s shares, trading in the US as the ADR, fell by 3.5% to 29.44 per share on Wall Street.
Kazuo Hirai, Sony Corp. CEO and Lynton, in a memo to employees, stated that the write-down was basically as a result of the significant downturn in the DVD business -the two will stay in the company for a couple of months before stepping down, to allow for a smooth change in leadership.
To counteract some of its losses at Sony Pictures, Sony is set to sell 13% of its healthcare technology company shares to Goldman Sachs, in a $318 million deal.