“If we were any more successful, we’d be bankrupt.”

– Sony CEO Howard Stringer on the company’s LCD business, May 28, 2008

About the best thing to be said for Sony’s grotesque financial results is that they came in smaller than expected. The company’s 98.9 billion yen ($1 billion) loss for the fiscal year ended March–its first net loss in 14 years–wasn’t nearly as bad as the 150.0 billion yen ($1.57 billion) figure it had predicted in January or even close to the 173.8 billion yen ($1.8 billion) analysts polled by Thomson Reuters had been forecasting. And the same is true for Sony’s fourth quarter, as well. The net loss of 165.1 billion yen ($1.7 billion) it reported was far better than the 228.7 billion yen ($2.39 billion) forecast.

Still ugly as hell, though. And according to the company’s leadership, its next fiscal year will be little different. Sony is forecasting a loss of 120 billion yen ($1.2 billion). Given that unfortunate outlook, Sony (SNE) is closing three factories in Japan, part of an ongoing effort to shore up a business ravaged by the worst recession in decades. But cost-cutting measures like that can only do so much.

As analysts note, what Sony really needs is a killer product. It is no longer the force it once was in consumer electronics, having ceded its dominance in portable music players to Apple (AAPL) and its leads in the television and videogame console markets to Samsung Electronics and Nintendo. “Their outlook gave me the impression that their business is heading for a gradual recovery,” Fujio Ando, senior managing director at Chibagin Asset Management, told Reuters. “But it would all depend on whether they would be able to start producing popular products, because right now they have no ‘Number One’ products. I see Sony’s branding power weakening.”

And that’s something of which Sony is painfully aware.

“We have two distinct challenges facing us,” Sony CEO Howard Stringer recently told the New York Times. “The first is the global slowdown, which forces us to make significant adjustments. The second challenge is the evolution of our competitive environment. New competitors [are] springing out everywhere.”

Indeed. And while Sony seems to be meeting the first challenge, albeit slowly, it hasn’t yet begun to make headway toward meeting the second. And at this point, one wonders if the company is even capable anymore. As Japanese Economy, Trade and Industry Minister and former Sony employee Akira Amari asked back in October 2006, “What has become of the Sony known for its technology?”

Google Chief Executive Eric Schmidt described the the company’s performance as “another strong quarter, despite a more challenging economic environment.” Sadly, investors didn’t quite see it that way. Shares in the company tanked in after-hours trading.