by CIO Staff

Sony Sees Q2 Operating Loss Due to Batteries, PS3

Oct 26, 20063 mins

The global recall and replacement of millions of laptop batteries, and startup costs for the PlayStation 3 console, pushed Sony’s operations into the red for the July-to-September quarter, despite a jump in sales.

Sony Headquarters
Sony Headquarters

The company reported an operating loss of 20.8 billion yen (US$174.5 million) against an operating profit of 74.6 billion yen in the same period last year. The loss includes the estimated 51.2 billion yen that Sony will lose as a result of the laptop battery recall currently under way.

Sony’s net income, which includes profit and loss from its core operations and subsidiaries, and other extraordinary items, dropped 94.1 percent to 1.7 billion yen.

However, sales and operating revenue rose 8.3 percent to 1.85 trillion yen. The digital still camera business enjoyed a particularly strong quarter, with the DSC-T10 model proving popular with consumers. Sony’s mobile phone joint venture with Telefonaktiebolaget LM Ericsson, Sony Ericsson Mobile Communications, also enjoyed record sales thanks in part to the popularity of its Walkman and Cybershot phones. In the motion picture sector, the movie Talladega Nights: The Ballad of Ricky Bobby helped Sony Pictures Entertainment, Sony said.

Sony’s core electronics business saw a 12.1 percent increase in sales, but operating profit dropped more than 70 percent, largely due to the battery-replacement costs and a one-time pension fund gain the year earlier. Sony’s liquid crystal display (LCD) TV business saw a healthy rise in sales, but the business still lost money in the quarter.

Sony PlayStation 3
Sony PlayStation 3

“Excluding these items, operating profit in electronics would have increased slightly,” said Nobuyuki Oneda, Sony chief financial officer, at a Tokyo news conference. The largest contributors to profit were digital video cameras, digital still cameras, and broadcast and professional equipment, he said.

The games business dropped into the red as a result of startup costs for the PlayStation 3. Sales also fell due to lackluster demand for the PlayStation Portable (PSP). For the full year, Sony cut its shipment estimate for the PSP from 12 million units to 9 million.

The company’s restructuring plan remains on track and has already achieved several of its goals, said Oneda. By the end of September, the company succeeded in achieving cost savings of 120 billion yen against its goal of 200 billion yen by the end of March 2008. Two manufacturing sites remain closed and it still needs to discontinue some products, but Sony has already laid off 10,100 staff, which is above its target of 10,000 staff.

Martyn Williams, IDG News Service (Tokyo Bureau)

Keep checking in at our Sony Battery Recall page for more on this unfolding story.

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  • Sony PlayStation 3 Details Revealed

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