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Sony again hit by falling prices

Sony again hit by falling prices

Price competition in several of Sony's key business areas resulted in another quarterly loss for the company as sales fell during the period from January to March, it said Wednesday.

For the fourth quarter of its fiscal year, Sony reported a net loss of YEN 56.5 billion (AUD$687 million as of March 31, the last day of the period reported) compared to a loss of YEN 38.2 billion a year earlier. Sales were YEN 1.7 trillion, down 4.2 percent from the same quarter a year earlier.

Sony also announced full year results. Sales in the 12 months to the end of March fell 4.5 percent to YEN 7.2 trillion, due partly to the establishment of a music joint venture with BMG and the resulting accounting changes. Net profit for the full year increased by 85 percent to YEN 163.8 billion, attributed partly to tax credits, higher profits at Sony Ericsson Mobile Communications, and higher revenue from Intertrust Technologies, in which Sony owns a stake, as the result of a licensing deal with Microsoft.

Sales in Sony's core electronics group dropped during both the fourth quarter and for the entire year and the business reported an operating loss in both periods.

Sales of CRT (cathode ray tube) televisions and portable audio products dropped as the high-end market began to gravitate towards flat-panel televisions and digital music players, Sony said. Sony saw higher sales of flat-panel TVs, digital still cameras and rear-projection TVs.

But despite higher sales of some products, price competition led to slimmer margins and deeper losses. Sony's portable audio, TV and semiconductor operations all recorded operating losses for the year, said Takao Yuhara, the company's corporate senior vice president in charge of finance and investor relations, at a Tokyo news conference.

Among the profitable areas were the information and communications sector, which includes the Vaio PC business, and the video sector, including digital video recorders, he said.

Sony's game business saw annual sales drop 6.5 percent and operating profit decline 36.1 percent. Despite the successful launch of the PlayStation Portable (PSP) in Japan and the U.S. during the year, lower prices of its PlayStation 2 console cut into results.

For the year Sony shipped 16.2 million PlayStation 2 consoles, 3.0 million PSPs and 2.8 million PS One consoles. Shipments of PlayStation 2 software totaled 252 million units while that of PSP software was 5.7 million units.

During the current year Sony expects to see shipments of PlayStation 2 consoles and PSP devices equal at 12 million units each, said Yuhara.

For the current fiscal year, ending March 2006, Sony expects sales and operating revenue to rise 4 percent to YEN 7.45 trillion, but for net profit to drop 51 percent to YEN 80 billion.

Sony's difficulty in competing in the increasingly crowded and fast-moving consumer electronics industry accounts in a large part for a management shake-up last month in which Howard Stringer, currently chairman and chief executive officer (CEO) of Sony Corp. of America, was named to succeed Nobuyuki Idei as Sony's chairman and group chief executive officer.

The shake-up, which is pending shareholder approval, will also see Kunitake Ando, Sony's president, replaced by Ryoji Chubachi, currently executive deputy president and chief operating officer for electronic components and manufacturing.

The management changes surprised Sony watchers, many of whom had expected Ken Kutaragi, president and group CEO of Sony Computer Entertainment Inc., to succeed Idei. Some observers said Sony's appointment of a foreigner, a first for the company and unusual for most major Japanese companies, was a sign of the company's desperation.

Stringer said last month that Sony requires a more drastic restructuring and that management "will not hesitate to make tough decisions to make Sony the strongest electronics, entertainment and technology company it can be." Stringer was absent from Wednesday's news conference.


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