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Sony Profit Is Off 20% as Electronics Prices Decline

Earnings: Sluggish sales in Japan hurt music unit. Film revenue is low compared with strong results of 1997.

October 29, 1998|From Times Staff and Wire Reports

Sony Corp. said fiscal second-quarter earnings fell 20% because of steep declines in the prices of computer monitors, broadcasting equipment and cellular telephones as well as the soft performance of its music group in Japan.

Group net income at the world's second-largest maker of consumer electronics fell to $383 million in the three months ended Sept. 30.

Sony's music division was hit hard by slow sales in Japan, historically one of the company's best markets, which caused the unit's operating income to fall 75% to $31 million. Revenue, however, increased 10% to $1.4 billion. The company, whose new releases include "The Miseducation of Lauryn Hill" and "Back to Titanic," also cited increased costs for TV advertising, marketing and new artist development.

In a statement, Kevin Kelleher, chief financial officer of Sony Music Entertainment, said the operation continues to perform well, achieving record revenue for the six months ended Sept. 30. "Additionally, we have gained market share in almost every territory around the world and are extremely well-positioned for the holiday season."

Revenue for Sony's film group fell 6.7% in the quarter to $1.04 billion, in part because the company experienced such a strong year in 1997, but operating income climbed 5.9% to $127 million.

TV syndication earnings from such shows as "Party of Five," "Seinfeld" and "The Nanny" were major contributors. Sony's strongest film in the quarter was "The Mask of Zorro."

Increased competition for the electronic products that account for three-quarters of the company's revenue also prompted Sony to slash its forecast for full-year earnings by 21%.

"It's clear that we're under extreme pressure in some products and in some markets," said Sony's corporate senior vice president, Masayoshi Morimoto.

"It's looking like a testing time for Sony," said Alan Bell, an analyst at Schroders Japan Ltd. who rates Sony "perform in line." "Trading conditions are deteriorating and currency movements have not been helpful," he said.

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