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Sony's Net Profit Drops 94%
On Battery Recall, PS3 Delays
By YUKARI IWATANI KANE
October 26, 2006 8:08 a.m.
Sony Corp. said on Thursday that net income dropped 94%, hit by a massive battery recall and delays in the highly anticipated PlayStation 3, just one quarter after a revival in its core electronics division seemed to point to a turnaround.

Sony's net profit plunged to ¥1.7 billion ($14.3 million) for the fiscal second quarter from ¥28.5 billion a year earlier. Revenue rose 8% to ¥1.85 trillion from ¥1.7 trillion a year earlier.

On top of recall costs, Sony was hit particularly hard by a ¥43.5 billion operating loss in its videogame division as it prepares to launch the much-anticipated PlayStation 3 console next month. It had to postpone the release of the PlayStation 3 in Europe until the spring and halve shipments to the U.S. and Japan due to a manufacturing delay. Unexpectedly strong competition from Nintendo Co. also prompted Sony to take the unusual step of cutting the price of the PlayStation 3 in Japan before launch, adding to costs.

The October-December period is a key opportunity for the Japanese electronics maker to gain much-needed momentum because consumers make big purchases as holiday gifts. But this year is shaping up to be tougher than expected as rivals such as Matsushita Electronics Industrial Co., and Samsung Electronics Co. gear up for a fight.

"The competition is considerably tougher than we thought," Sony Chief Financial Officer Nobuyuki Oneda said, speaking about the television industry. "Prices are coming down at a faster rate than we had expected, particularly in the U.S."

Sony still expects its unprofitable television business to turn profitable in the second half of the fiscal year, but Mr. Oneda said the company now believes prices throughout the industry will fall five percentage points more on an annual basis in the U.S. – its biggest market -- compared with the 25% to 30% that it expects world-wide. It didn't provide specific forecasts for the third quarter ending Dec. 31.

Sony's electronics unit, which accounts for three quarters of the group's revenues, had looked like it was turning itself around until a massive recall of its laptop batteries derailed those efforts. Almost every major computer manufacturer is recalling Sony's batteries after Dell Inc. and Apple Computer Inc. found that they could overheat and catch fire.

The unit reported a 12% increase in sales for its fiscal second quarter, helped by the popularity of its Bravia televisions, Cybershot digital cameras and Vaio computers. But its profit declined 71%, illustrating how badly recent problems are weighing on the company.

The movie division posted an operating loss of ¥15.3 billion for the quarter despite a 12% increase in revenue as "Zoom" and "All the King's Men" flopped and DVD sales declined.

Sony last week slashed its net profit forecast for the fiscal year by 38% to ¥80 billion, hurt by its recent problems. It continues to expect revenue to increase 10% to ¥8.23 trillion from a year earlier.

Adrian Laguna wrote:Really, who is surprised their profits went down the shitter? I wasn't expecting such a dramatic fall, but after Sony's recent antics, it is to be expected. At this point in time I think we should replace the Sony leadership with monkeys, maybe it'll improve things.

Admiral Valdemar wrote:

Adrian Laguna wrote:Really, who is surprised their profits went down the shitter? I wasn't expecting such a dramatic fall, but after Sony's recent antics, it is to be expected. At this point in time I think we should replace the Sony leadership with monkeys, maybe it'll improve things.

Didn't work for the United States gov't, so doubt that'll work.

Mario Makes Mega-Bucks
Nintendo posts impressive financials.
by Kathleen Sanders

October 26, 2006 - Nintendo fans can pour a tiny glass of sake today to celebrate the company's reported 54.4 billion yen (approx. $460 million US) profit for the first half of the fiscal year. Last year, in the same period Nintendo earned 36.63 billion yen (approx. $309 US).

Sales of the hugely popular Nintendo DS soared to 10.09 million units in the first half, up from 3.57 million a year earlier, the company said. It plans to sell 20 million of the machines during the current fiscal year.

The 10.09 million DS units sold are partially responsible for the 48 percent increase in profit. The house that Mario built boasted 298.82 billion yen (approx. $2.5 billion US) in overall sales -- a 69 percent jump from the reported 176.36 billion yen (approx. 1.5 billion US) made in the same period last year. Nintendo said it plans to sell 20 million DS systems during its current fiscal year.

Despite the favorable report and the anticipation of the launch of Nintendo's Wii, the full-year outlook is remaining the same as the sunnier outlook it issued October 3. Its net profit prediction for the period ending March 31, 2007 is still 100 billion yen (approx. $850 million US).

Dendrobius wrote:Is it just me, or is everybody purposely ignoring that Sony's revenue is growing quite healthily at 8~10%, and that they made a good profit last year based on that revenue?

The PS3 and battery debacles have really shafted them good this year, but those are closer to one off events than long term drains. Come next year, provided nothing as retarded as the battery thing comes up and the PS3 actually goes out the door on schedule, everything should be sunshine and lollipops again.