by CIO Staff

Sony Reports Profits Well Ahead of Forecast

Apr 27, 20063 mins

Sony on Thursday reported higher sales and profits for the year to the end of March, beating its own forecasts.

Sales of products like flat-screen liquid crystal display (LCD) televisions and the widespread availability of the PlayStation Portable (PSP) during the year helped boost its key electronics and gaming segments.

The company reported a net profit for the year of 124 billion yen (US$1 billion as of March 31, the last day of the period being reported), about a third lower than in the prior year but well ahead of Sony’s forecast of a 70 billion yen profit. That forecast was made in January, and itself was a revision on a prediction made in September 2005 of a 10 billion yen loss for the year.

Total sales came in at 7.5 trillion yen, which is up 4 percent on the year and slightly higher than Sony’s forecast.

Sony sold 2.8 million LCD TVs during the fiscal year, up from 1 million a year earlier, while PSP sales jumped to 14 million from 3 million units, the company said.

Samsung Q1
Nobuyuki Oneda

The increase in LCD TV sales is especially important for Sony because its late entry into the booming market had seen it lose share to faster rivals such as Sharp. However, with the sales increase, Sony also delivered some bad news: Fierce competition pushed prices down, so profits from its LCD TVs decreased.

For example, the price of a 32-inch LCD TV fell by about 25 percent in Japan during the fiscal year, and the declines are expected to be about the same this year, said Nobuyuki Oneda, Sony’s chief financial officer, at a news conference in Tokyo.

Overall, Sony’s core electronics segment saw a 2 percent increase in sales but ended with an operating loss of 31 billion yen. Profits in the game sector were also sharply lower as a result of R&D costs associated with the PlayStation 3 console, which is due to launch in November.

Sony expects to ship 6 million PlayStation 3s between when it launches and the end of March 2007, it said.

Restructuring costs during the year were 139 billion yen, which were about 54 percent higher than last year. The majority of those costs were recorded in the electronics sector.

“Restructuring is on track,” said Oneda. He sounded cautiously optimistic of the company’s progress in meeting targets set by the plan, which began last year after Howard Stringer took over leadership of Sony.

For the current financial year, ending in March 2007, Sony expects net profit to climb to 130 billion yen and net revenue to hit a record 8.2 trillion yen, it said.

Sony’s restructuring plan calls for revenue to hit 8 trillion yen by the end of March 2008, and for its profit margin to hit 4 percent.

While the company’s revenue forecast for this year puts it ahead of the restructuring schedule, its profit margin forecast for the current year is 2 percent. That means Sony will have to double its profit margin in the next fiscal year to meet its target.

-Martyn Williams, IDG News Service

For related news coverage, read Sony Ericsson Profits Surge on Strong Phone Sales.

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