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Lower prices cut into Sony's third quarter

Lower prices cut into Sony's third quarter

Sony reported a drop in third-quarter sales and operating profit as it battled stiff competition and pricing pressure in some of its core electronics businesses.

Total revenue at the Tokyo-based company fell 7.5 per cent to YEN 2.15 trillion ($US20.9 billion) as of Dec. 31, 2004, the final day of the period being reported). Operating profit fell to YEN 138.2 billion from YEN 159 billion, largely as a result of poor results in its core electronics business.

Net income rose 55.3 per cent to YEN 143.8 billion, from YEN 92.5 billion year-over-year, helped by tax related issues in Japan and the US, the company said. The drop in sales did not come as a surprise. Sony took some of the sting out of the results last week when it lowered its financial forecast for the full fiscal year, which ends March 31, and said its performance in the third quarter had been poor.

Sony's electronics business reported revenue of YEN 1.51 trillion for the quarter, down 0.9 per cent from YEN 1.52 trillion a year earlier.

Sales of flat-panel and rear projection televisions and digital still cameras did well, while cathode ray tube (CRT) televisions and Vaio PCs did poorly in most regions. Looking at the sales levels alone does not provide the whole picture, however. Many of Sony's best-selling products are in very competitive markets and while sales have advanced, the amount of money Sony is able to make on each product has fallen.

A big part of Sony's turnaround plan for its electronics business, outlined earlier this month, is to rely less on outside parts suppliers, make more products itself and develop more Sony-exclusive technologies that can help to give it an edge over competitors.

The focus would be on four areas, group chief financial officer for Sony, Katsumi Ihara, said. The company would strengthen its display and digital imaging businesses, build up its Connect online music division and continue to invest in semiconductors and key devices.

The effect of price cuts also touched Sony's game business. Despite launching its PlayStation Portable (PSP) in Japan during the quarter, the effect of price cuts on its PlayStation 2 console meant hardware sales declined. Software sales increased, but overall sales from its game unit were down 23 per cent to YEN 282.6 billion, the company said.

Shipments of PSPs between its December 12 launch and the end of the month reached 510,000 units, and software shipments totalled 1.3 million units, Sony said.

One of Sony's brightest segments was its movie business, which reported a 12.1 per cent increase in sales to YEN 203.1 billion, led by strong DVD sales of the Spiderman 2 movie and the Seinfeld television series.


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