A: Introduction of Trinitron television sets and Walkman portable music players vaulted this Japanese consumer-electronics brand to the forefront years ago, but that seems a distant past.
- Andrew Leckey
Jan. 13: Mattel's offerings are playing well in overseas markets
Jan. 6: Sun Microsystems remains a work in progress
IN THIS PACKAGE
- Couple's finances plowed under by farm life
- Laws provide military with weapons against predatory sales practices
- Annuity's purpose deciding factor in whether to cash it in
- The savings game
- The Leckey file
- Getting started
- Spending smart
- Can they do that?
- Taking stock
- Risky business investing in turnaround stocks
- The week ahead
- Sony Corp.
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That's not all Sony has to worry about.
Earnings declined 94 percent in its July-to-September quarter, due in part to the embarrassing battery recall involving most major computer-makers that cost it about $430 million in the quarter. Dell Inc. and Apple Computer Inc. initially discovered that the Sony-made power packs could overheat.
Shares of Sony (SNE) are up 2 percent this year, following gains of 5 percent last year and 12 percent in 2004. Due to the battery problems and the likelihood that financial performance will continue to weaken, Fitch Ratings downgraded Sony's long-term debt to triple-B-plus from single-A-minus.
In video games, Sony must contend with the popularity of Nintendo's DS hand-held unit and Microsoft Corp.'s Xbox 360. Profit in Sony's electronics business was down 71 percent in its recent quarter as it readied the November launch of its PlayStation 3 console that features the high-definition video of Blu-ray DVD technology. It is designed to become the heart of its home-video system.
A manufacturing delay postponed European release until spring and cut shipments to the U.S. and Japan. In Japan, the firm reduced PlayStation 3's price tag 20 percent before launch. Finally, the head of Sony's home-entertainment division was sent packing.
British-born Howard Stringer, the first foreigner to head Sony, expects lower-than-expected profitability for the fiscal year ending March 2007.
Because Sony still has a powerful brand, marketing might and potential, consensus rating of its stock by the Wall Street analysts who track it is a "hold," according to Thomson Financial. That consists of two "buys," two "holds" and one "strong sell."
Earnings are expected to increase 16 percent this year and 79 percent in 2007, according to Thomson Financial. The five-year annualized growth rate is forecast as 13 percent.
This fall the firm launched Sony Connect, an electronic bookstore on the Internet, and is selling a device that displays e-books bought from the store. It missed its spring launch because of technical problems.
Q: Does Fidelity Utilities Fund look like a good bet for my individual retirement account? -- C.J., via the Internet
A: This interesting play on telecommunications and utilities performs a little better than the Russell 3000 Utilities Index in most years.
It is somewhat more volatile than its peers because it owns less than 40 stock names and is willing to make big bets on individual companies. One holding can have dramatic impact either up or down on the fund's returns.
The $1.35 billion Fidelity Utilities Fund (FIUIX) is up 26 percent this year to rank in the top 9 percent of utilities funds. Its three-year annualized return of 21 percent places it below the midpoint of its peers.
"I have a `buy' rating and hold this fund in two of my model portfolios because it adds a little defensiveness to a portfolio," said Jack Bowers, editor of the Fidelity Monitor investment letter in Rocklin, Calif. "Telephone stocks have opportunities with faster Internet services and cable television over phone lines, yet a lot haven't recovered from the bear market."
In addition, higher energy prices permit electric utilities to get rate increases, which means they stand up well to rising inflation, Bowers added.
The strategy of Fidelity Utilities Fund doesn't change, though it does change managers from time to time. Douglas Simmons replaced Andrew Burzumato as manager a year ago and has reduced its telecom and media stocks somewhat since then. Simmons has considerable experience analyzing utilities.
Forty-seven percent of fund assets are in telecommunications, 40 percent in utilities and 9 percent in media. There are small percentages in business services, energy and industrial materials. Top holdings were recently AT&T, Verizon Communications, Comcast Corp., BellSouth, AES Corp., Sprint Nextel, TXU Corp., Exelon Corp., Duke Energy and Alltel Communications Inc.
"You wouldn't want to have so concentrated a portfolio unless it was in fairly stable stocks, and, fortunately, this fund is," concluded Bowers. "Most of its holdings are dividend payers, so in an economic slowdown they won't be hurt much."
This "no-load" (no sales charge) fund requires a $2,500 minimum initial investment and has an annual expense ratio of 0.84 percent.
Q: What exactly is a reverse mortgage, and is it backed by the government? -- R.C., via the Internet
A: A reverse mortgage permits you to gradually take equity out of your home and increase its debt. About 43,000 homeowners took out reverse mortgages last year.
You can withdraw about half the value of your home, and the bank won't collect principal and interest until you or your heirs sell. There are no payments for the life of the loan.
"A reverse mortgage gives a person over 62 years of age opportunity to draw money out of accumulated home equity," said Peter Bell, president of the National Reverse Mortgage Lenders Association in Washington, D.C. "You can take money out in a lump sum, fixed monthly payments or as a line of credit in which you request advances."
The Home Equity Conversion Mortgage, the most common type, provides federal mortgage insurance protecting the lender against loss. This permits the lender to give a higher-value loan or offer a loan to someone who otherwise wouldn't qualify. The site www.reversemortgage.org gives a state-by-state list of Federal Housing Authority-approved lenders.
There also are non-insured reverse mortgages, often used for more expensive homes requiring jumbo loans that exceed the FHA loan limits.
Andrew Leckey is a Tribune Media Services columnist. E-mail him at firstname.lastname@example.org.