While researching the post I made earlier about Nintendo, I ran across a related Wall Street Journal article about Sony.  Sony has had a tough couple years like a lot of companies have but they are looking toward a brighter future as cost-cutting efforts begin to pay off and new products are introduced. The part of the article that really caught my eye, though, was a paragraph that looked at the exposure Sony has to the currency markets as a Japanese company selling goods worldwide (emphasis added):

Sony said the yen’s recent strength is also a concern. The company is projecting the U.S. dollar to trade at an average rate of 90 yen and the euro at 125 yen for the fiscal year. For every one yen that the euro falls, Sony’s annual operating income takes a 7 billion yen hit, while a one yen drop in the dollar will result in a 2 billion yen decrease in operating income. As of Thursday evening in Tokyo, the euro was trading around 117 yen and the dollar around 93 yen.

There are ways that Sony can hedge itself against large Euro/Yen and Dollar/Yen swings, but these hedging mechanisms are not perfect and given Sony’s size it may be difficult to adequately hedge such a large position (Sony would be dependent on other players taking the opposite side of those trades).

Corporate News: Sony Is Upbeat Despite Loss — Company Expects to Swing Back to Profit, but Currency Rates Are Problematic. Daisuke Wakabayashi. Wall Street Journal. (Eastern edition). New York, N.Y.: May 14, 2010. pg. B.2