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Sony Slips $191M Loss As LCDs, PS3 Tumble

By Oonagh Reidy | Friday | 29/07/2011

Sony are counting its losses after the Japan earthquake as sales slump10%. The electronics giant has announced its results for the first quarter to June 30.

Click to enlarge
However, there wasn't a lot of good news for the Bravia maker, whose net profit slumped into negative territory, 15.5bn yen or $191m, compared to a profit of 25.7bn yen the same period in 2010. 

Overall, sales for Q1 of its fiscal year, covering the period April - June, slumped to 1,494.9 billion yen (U.S$ 8,456m), a drop of 10% compared to same quarter last year, which Sony blamed partly on knock on effect of the earthquake in March leading to decrease in consumer products (CPS) business, which includes gaming, audio and TV. 

Sales in the key sector fell 17.9% year-on-year to 732.3 billion yen (US$9,040 m), blamed on falling LCD sales, poor markets in the U.S and Europe, and price competition in PC category. 

Sales of its PlayStation 3 also went south, recording 1.8 million units sales in the period - a fall of 0.6m compared to a year ago. 

However, LCD sales in Japan bucked the trend, jumping due to higher demand as the country moves to full digital broadcasting this month.  

Video camera sales were also down due to "contraction" in the sector, it said. 

Sony's operating income decreased for the first quarter was 27.5 billion yen  or US$340m, which marked a shocking 59% drop (local currency), due to a dip in gross profit  and deteriorating cost of sales ratio. 

Factors cited included the negative impact of the earthquake as well as the general "deterioration of the electronics business" Sony said today. It also blamed declining income on additional expenses associated with the hacking of its PlayStation network earlier this year. 

Sony also incurred other "incremental charges" including those associated with the earthquake clean up of 5.3 billion yen (U.S.$66 million). These included restoration repairing of factory fixed assets damaged in addition to idle manufacturing capacity costs. 

However, 1.3 billion yen (16 million U.S. dollars) of these charges has been offset by insurance claims "deemed probable" to be granted.  

However, there is some light at the end of the tunnel, it seems. Business operations hit by the quake are recovering "faster than anticipated" in its May forecast. 
Sony are also predicting lower LCD sales compared to the May forecast and more unfavorable foreign exchange rates, forcing it to cut forecast earnings for the full-year by 25% to 60bn yen, down from an expected 80bn yen. 

The sales outlook is also gloomy for the remainder of the fiscal year for the Japanese giant, citing poor business environment. 

As in its previous quarter, Sony cited production "issues" in some categories, constraints in its supply chain and lower production capacity due to damaged manufacturing equipment.  

On the pictures front, Sony was saved by DVD releases including The Green Hornet, Battle: Los Angeles and Just Go With It, pushing sales 9.3% year-on-year to 144.4 billion yen or $1,7bn (23% increase in U.S.currency).

Sony Music recorded sales of 109.6 billion yen or $1.3bn "reflecting strong sales of a number of key releases" including Adele's 21, Beyonce's 4, Foo Fighters' Wasting Light and music from hit TV show Glee. 

Phone sales for its business, Sony Ericisson, slumped 32.1% to 1.1 billion euros ($1.7bn) due to constrained components supply and a decline in basic feature phones shipped as consumers focus on smartphones.  

To this end, SE has gone on an Android binge, releasing a slew of models this year, in a bid to play catch up with smartphone rivals like Apple and Samsung. 

Losses before taxes of 43 million euros ($61m) was recorded for the quarter at the European phone giant. 

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Apr/May 2011 issue

reviews the hot new iPhone attach device, the Zeppelin Air. And we look at what's going on in the tablet space...

Reviewed by Oonagh Reidy Rating: 3.5