Sony's quarterly loss widens

/ Source: The Associated Press

Sony's loss in the January-March quarter widened from a year ago on massive costs for the new PlayStation 3 game machine, but the company forecast that profit for the current year would more than double to a record on strong sales of flat TVs and other electronics.

Sony Corp. racked up a 67.6 billion yen, or $563 million, loss for the fourth quarter of the fiscal year, it said Wednesday, worse than the 66.5 billion yen loss the Japanese electronics and entertainment company reported the same period a year earlier.

Quarterly sales rose nearly 13 percent to 2.01 trillion yen ($16.8 billion;) from the previous year, according to the company behind the Walkman portable music player and "Spider-Man" movies.

Solid demand for Bravia liquid crystal display TVs, Vaio personal computers and Handycam video cameras buoyed sales, lifting profit for the fiscal year through March 2 percent to 126.3 billion yen ($1.1 billion).

For the current fiscal year, Sony expects profit will more than double to a record 320 billion yen ($2.7 billion). That upbeat outlook appeared to reflect a much-promised revival at its electronics unit, which had been battered by competition from cheaper rivals, threatening one of Japan's most prized brands.

"The good news is that profitability is being maintained in the electronics unit as well as sales," said Mitsuhiro Osawa, electronics analyst at Mizuho Investors Securities Co. in Tokyo.

"The results came about because of wise steering on the part of management," Osawa added, referring to the drastic revival efforts spearheaded by Welsh-born American Howard Stringer, Sony's first foreign chief executive.

After taking helm in 2005, Stringer got Sony to drop unprofitable businesses, sell off assets, reduce jobs and shutter plants.

Sales for the just-ended fiscal year totaled a record 8.3 trillion yen ($69 billion), up 10 percent from the previous year.

For the year through March 2008, it projects sales will grow 6 percent to 8.78 trillion yen ($73.2 billion).

"Our results demonstrate a healthy recovery," said Corporate Executive Officer Nobuyuki Oneda, adding that the Bravia controls top world market share in the sector measured in sales.

The sale of its former headquarters in Tokyo will add 59 billion yen ($492 million) for the fiscal year through March 2008, Sony said.

The absence of expenses for a massive recall of battery packs for laptops, totaling about 51 billion yen ($425 million) in fiscal 2006 will add to its bottom line, it said.

Last year, Sony announced a massive global recall of about 10 million lithium-ion batteries used in not only its own laptops but also those from Apple Inc., Dell Inc., Lenovo Group Ltd. and others, which were suspected of being faulty and bursting into flames in some cases.

The big remaining problem in Sony's sprawling entertainment empire is the PlayStation 3, which is so packed with sophisticated technology it has been a money-loser since its launch in November. The machine was also burdened with earlier hefty development costs.

Sony officials have acknowledged setting the PS3 prices at below production costs also eroded profits, and have repeatedly warned that the gaming division would be in the red. They said the PS3 business would likely stay in the red this fiscal year.

Also, intense competition with Nintendo's hit Wii, with its unique wand controller, appears to be hurting the Playstation 3.

Sony shipped 5.5 million PS3 machines in fiscal year just ended, fewer than the 6 million the company had targeted. Nintendo shipped 5.84 million Wii machines worldwide during the same period.

But Sony is promising a recovery in the gaming unit when the lineup of PS3 game software strengthens over the summer, helping make the machine more popular. Sony is expecting to ship 11 million PS3 consoles for the fiscal year through next March.

"The PS3 business will really get off the ground this fiscal year," Oneda said.

Sony's biggest improvement came in its electronics sector, where sales jumped in all major regions, gaining 7 percent on year in Japan, 8 percent in the U.S. and a hefty 24 percent in Europe in the fiscal year through March 31.

Sony's pictures division also did well in fiscal 2006, seeing sales increase 30 percent and operating profit surge 56 percent, thanks to better theater and home revenue from "The Da Vinci Code" and "Casino Royale."

Sony's joint ventures produced mixed results.

Sony Ericsson, the joint venture in cell phones with LM Ericsson, saw profit and sales rise as it shipped 51 percent more cell phones from the previous year at 83 million handsets.

Sony BMG suffered a drop in sales and profit, largely because of an overall decline in the music market. Best-sellers included Justin Timberlake's "Future Sex/Love Sounds" and Beyonce's "B'Day."

The latest results show the key strides Sony has made in playing catchup after falling behind rivals such as Sharp Corp. and Samsung Electronics in flat panel TVs and Apple in digital music players.

"Those bullish forecasts seem to reflect Sony's gaining confidence in itself," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.