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Friday, Oct. 27, 2006

Sony profit dives 94% in quarter


Staff writer

Sony Corp.'s group net profit for the July-September quarter took a 94.1 percent nosedive from the previous year due the massive global recalls of its defective lithium-ion batteries and sluggish sales in its gaming division, the company announced Thursday.

The electronics giant also posted a group operating loss of 20.8 billion yen for the second quarter, a sharp fall from 74.6 billion yen the previous year. Sony's group net profit plunged to 1.7 billion yen on sales of 1.85 trillion yen, which was up 8.3 percent, during the three months. It also posted a pretax loss of 26.1 billion yen, down from 95.4 billion yen in profits.

During the previous second quarter, Sony appropriated 73.5 billion yen in its operating profit due to a change in its pension system, which pushed up the quarterly figure.

Sony has already announced that its group net profit for fiscal 2006 will decrease to 80 billion yen, a downward revision of its initial forecast of 130 billion yen, made in July.

The recall of about 9.6 million batteries, involving most major computer makers, will cost Sony 51 billion yen, but this isn't the only cause of the losses.

Sony's gaming unit posted an operating loss of 43.5 billion yen for the July-September quarter, compared with 8.2 billion yen the prior year.

"Performance in the gaming unit is lagging behind" from the company's strategy plan, said Nobuyuki Oneda, Sony's chief financial officer. "Our task is to think of a way to boost sales in the midterm."

Sales of video-game consoles PlayStation Portable and PlayStation 2 are on the decline, and the company slashed the price for PS2, which has cut profits.

But Sony's core electronics division, which accounts for about 70 percent of group sales, is boosting sales thanks to its flat-TV Bravia series, Vaio computers and digital cameras.

Sony's operating loss for its televisions recovered to a loss of 10 billion yen from a loss of 34 billion yen in the same period last year, while sales jumped 46 percent to 255 billion yen.

The figure for TVs is expected to head into the black in the next quarter, Oneda said.

However, Sony is expected to have a tough time raking in profits in other areas in the second half of this year.

Sony has slashed the price of its new PlayStation 3, which will hit the stores Nov. 11, to 49,980 yen from 62,790 yen, which will cut its expected profit.

Sony can also expect more fallout from the battery recalls as several computer makers, including Toshiba Corp., are considering seeking compensation from Sony for lost business.

In August, Dell Inc. and Apple Computers Inc. announced they were recalling a combined 5.9 million Sony lithium-ion batteries in their computers due to their risk of overheating and catching on fire.



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