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Sony profits take big hit

May 16th, 2007 · No Comments

Sony’s financial year has ended in a world of pain. The company has posted its largest financial loss in four years. Its operating profit was 71.75 billion yen, down from 226.42 billion year-on-year.
The company’s Electronics performance remained strong though, thanks to its Bravia line of screens, VAIO computers and digital cameras. Sales increased 16.9 per cent. Sony’s forecast for 2008 is an operating profit of 440 billion yen, bolstered by growing sales of LCD and reduced production costs.
Carl Gressum, Senior Analyst at Ovum observes: “The last quarter was a tough one for Sony, and there are few bright stars on the horizon. The Electronics division, although enjoying a surge in sales, still struggles with its profitability, primarily due to the competitiveness in the TV market. What is more alarming, however less of a surprise, is the poor performance of the Game division. Revenues spiked about 85 per cent to 281 billion Yen, however at the same time operating losses amounted to 108 billion Yen.” According to Gressum, Sony’s white knight is its Sony Ericsson joint venture, which reported a growth of 47 per cent in revenues to 2,925 billion Yen.
While Ovum suggests that Sony will see continued improvements in electronics, it believes that its games operation has painted itself in a corner. “With an operating loss running at 38 per cent it’s unlikely that Sony will do any further price drops before it sees substantial cost savings for the PS3. This is also reflected in the conservative and defensive PS3 shipment guidance from Sony; 11M for the next 12 months. The problem is that Sony needs scale to bring down the cost of manufacturing, and also to bring more third party developers to the platform. However, Sony shareholders are unlikely to approve any further widening of losses for the Game division.”

Tags: Corporate · LCD TV · Trade · Video games

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