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Sony Profits Plunge 94% As PS3 Costs Bite

Sony Profits Plunge 94% As PS3 Costs Bite

October 26, 2006 | By David Jenkins

October 26, 2006 | By David Jenkins
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More: Console/PC

Officials from Sony have announced the company’s fiscal results for the three months ending September 30th, showing an expected poor result as the company was hit by fallout from its global laptop battery recall and start-up costs for the PlayStation 3.

The company’s group net profit for the quarter was ¥1.7 billion ($14.3m), down from ¥28.5 billion ($240.2m) at the same time last year. The company lost ¥51 billion ($429.9m) alone on the recall of 9.6 million batteries. The recall prevented the company from enjoying any benefit from a 8 percent rise in sales to ¥1.85 trillion ($15.59bn).

The company’s games division reported a ¥43.5 billion ($366.6m) loss, from a ¥8.2 million ($69,000) profit in 2005, thanks to research and development, manufacturing and marketing costs related to the launch of the PlayStation 3. Sales and operating revenue were down by 20.5 percent to ¥170.3 billion ($1.43bn).

A decrease in hardware sales worldwide was attributed to a drop in price for the PlayStation 2 and PSP. Software sales also decreased overall, although individual PSP sales were up on the previous year. Combined profit from the PS2 and PSP business was described as “relatively unchanged”.

Worldwide hardware shipments during the quarter were put at 5.02 million for the PlayStation 2 (up 0.01 million) and 3.89 for the PSP (up 0.14 million). The company recently cut its shipment targets for the PSP from 12 million to 9 million. Software shipments for the PlayStation 2 were 47 million units (down 3 million) and for the PSP 12.9 million units (up 3.9 million).

In the core electronics segment, Sony's operating profit shrank 71 percent to ¥8 billion, while the company’s movie business also recorded a poor three months with an increased operating loss of ¥15.3 billion.

The poor results have forced Sony to revise its fiscal year profit forecasts up to March 2007, down 38 percent to ¥80 billion ($674.0m) – a decrease of 35 percent on fiscal 2005 results. Sales, meanwhile, are expected to increase by 10 percent to ¥8.23 trillion ($69.34bn).

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