Sony Corp.'s earnings plunged 26 percent for the latest quarter as expenses for job cuts and other restructuring costs and lower profits from its electronics, moviemaking and video games business offset profit improvement in its music business.
But the Japanese electronics and entertainment giant said Wednesday its sales rose for the October-December quarter and it boosted its profit forecast for the year due to a gain on a currency investment.
Sony said it earned 92.6 billion yen ($875 million) in the October-December period, down from 125 billion yen a year earlier.
Sales inched up 0.7 percent to 2.32 trillion yen ($22 billion) from 2.31 trillion yen, the Tokyo-based company said.
Sony is in the middle of a major reform effort, which includes slashing 20,000 jobs, or more than 12 percent of its global work force. Like other Japanese electronics makers, Sony has faced tough competition from U.S., South Korean and other manufacturers that offer cheaper products by taking advantage of lower labor costs.
Sony has struggled to deliver trendsetting electronic products such as the original Walkman and has fallen behind rivals in DVD recorders and TVs. The blossoming of the world's digital consumer market recently has helped the fortunes of Japanese electronics makers, but analysts say Sony needs time to turn itself around.
"In the past, Sony came up with products that created big leaps in growth," said Koichi Hariya, analyst at Mizuho Securities Co. in Tokyo. "For the last decade, hit electronics products have been PCs and mobile phones. Sony lost out in those genres, and it's paying for that now."
Restructuring charges for the quarter totaled 53.6 billion yen ($507 million), mostly in the electronics segment, compared to 14 billion yen in 2002.
Sony chief executive Nobuyuki Idei said his restructuring efforts were "progressing smoothly," and the company introduced new models of flat-panel TVs, DVD recorders, digital cameras and other products.
"Going forward, we will continue to spare no effort to expand sales and improve profitability," he said.
Sales in Sony's core electronics segment rose 0.4 percent to 1.474 trillion yen ($14 billion) from 1.468 trillion yen on solid demand for camera-equipped cell phones in Japan and Europe; DVD recorders including the PSX in Japan and Vaio personal computers in the United States. But operating income dropped nearly 40 percent to 49.5 billion yen ($468 million) from 82.1 billion yen mainly for job-cut expenses.
Profitability also foundered at Sony's video-game and movie businesses.
Operating profit in the game division sank 1.6 percent to 70.5 billion yen ($666 million) from 71.7 billion yen on beefed up development costs for computer chips. Sales edged down because of price reductions in the United States, Japan and Europe for the PlayStation 2 console. Game sales fell 4.5 percent to 367 billion yen ($3.5 billion) from 384 billion yen a year ago. Worldwide, Sony shipped 6.83 million PlayStation 2 machines in the quarter, down 1.2 million from a year ago.
Sony's movie business suffered, unable to repeat the success of the previous year's "Spider-Man." Operating profit plunged 82 percent to 5.6 billion yen ($53 million) from 31.7 billion yen. The disappointing box-office performance of "The Missing" also hurt, and sales at Sony Pictures Entertainment fell 29 percent to 181 billion yen ($1.7 billion) from 256 billion yen.
Sony Music Entertainment posted a 50 percent jump in operating income at 30.3 billion yen ($286 million) from 20 billion yen, although sales edged down 3 percent to 182 billion yen ($1.7 billion) from 188 billion yen. Albums that did well included Michael Jackson's "Number Ones" and Beyonce's "Dangerously in Love." Lower advertising, promotion and overhead expenses helped boost profitability, Sony said.
For the nine months ended Dec. 31, net income totaled 126.7 billion yen ($1.2 billion), down 44 percent from 226.7 billion yen a year ago. Sony posted sales and operating revenue of 5.7 trillion yen ($54 billion) for the nine months, down 1.6 percent from 5.8 trillion yen a year ago.
For the fiscal year through March, Sony now expects restructuring costs of 150 billion yen ($1.4 billion), rather than the initial 140 billion yen ($1.3 billion).
Sony raised its fiscal year profit forecast to 55 billion yen ($520 million) from the earlier 50 billion yen ($473 million), crediting a foreign exchange boost in a hedge fund that got a lift from the dollar's fall against the yen.
Sony took a special charge of 400 million yen ($3.8 million) for the quarter for recalling 10,700 plasma-display panel television sets made from November 2002 through August 2003 to replace a defective component for controlling the power supply.
Sony shares closed down 0.2 percent at 4,320 yen ($41) on the Tokyo Stock Exchange, shortly before earnings were announced.
"Sony is headed in the right direction," said Hariya, the analyst. "But the specifics aren't clear and it hasn't produced real results yet."