Sony Q1 Profits Halved on Electronics, Cell Phones

The effects of tough price competition in the electronics and cell phone businesses hit Sony's profits during the April to June quarter, it said Tuesday.

Net profit fell 47 percent against the same period last year to ¥35 billion (US$326 million) while sales were virtually unchanged at ¥2 trillion.

But the unchanged sales figure hides a good deal of movement within several of Sony's key business areas during the quarter. Sales and profitability of its Bravia LCD TVs (liquid crystal display) increased and the game business is finally back in the black after the launch of the PlayStation 3 console, however the Cybershot and Handycam digital camera and Vaio PC businesses, which have been doing well for Sony recently, hit hurdles in the form of increased competition.

Overall electronics sales rose 0.7 percent to ¥1.4 trillion while operating profits slid 57 percent to ¥44 billion. Regional sales fell in Japan and advanced in the U.S. and Europe but this was negated by the strong yen, which meant Sony recorded a drop in U.S. sales and unchanged European sales when calculated in the Japanese currency.

The electronics business was also hit by a collapse in income from affiliated cell-phone maker Sony Ericsson. The company contributed 97 percent less profits to Sony during the current quarter than it did last year.

On the positive side, an increase in sales of Bravia TVs led Sony's regional electronics sales growth worldwide except Japan, where the popularity of Blu-ray Disc recorders was notable. Sony hopes to ship 600,000 Blu-ray Disc recorders and 2.5 million Blu-ray Disc players worldwide this year, it said.

Sony's games sector saw 17 percent higher sales and an operating profit of ¥5 billion on the back of strong PlayStation 3 shipments. During the quarter Sony shipped 1.6 million of the consoles, which is more than double that of the same quarter last year. Additionally PlayStation Portable shipments jumped 75 percent to 3.7 million.

Sony's operating profit in the first quarter was ¥121 billion.

Looking ahead to the full financial year, Sony raised its sales estimate by 2 percent to ¥9.2 trillion. At the time of its last forecast it expected the value of the yen to stick around ¥100 to the U.S. dollar during the current year but it now expects this to be around ¥105. The currency figure won't, however, lead to increased sales due to a more cautious outlook on electronics.

Profit forecasts were cut to reflect lower results from Sony Ericsson with full-year net income being taken down 17 percent to ¥240 billion.

Sony Q1 Earnings Table

April to June 2008 April to June 2007 Change

Sales and operating revenue ¥2.0 trillion ¥2.0 trillion +0.1 percent

Operating income ¥73.4 billion ¥121.3 billion -39.5 percent

Net income ¥35 billion ¥66.5 billion -47.4 percent

Source: Sony Corp.

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