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Sony weighed down by PS3

Costs of launching its newest game console hurt its quarterly profit, but it raises its outlook.

January 31, 2007|From the Associated Press

TOKYO — Just when Sony Corp. appears to have turned around its electronics business, another part of its sprawling empire -- video games -- is dragging down profit.

The Japanese electronics and entertainment company Tuesday blamed the launching costs of its PlayStation 3 game console for much of the 5% drop in profit for the last three months of 2006 to 159.9 billion yen ($1.3 billion).

The PS3 launched in the United States and Japan in November. The next-generation game player was plagued with production problems that resulted in shortages and would keep the machines out of Europe until March. It also faces immense competition from Nintendo Co.'s Wii and Microsoft Corp.'s Xbox 360.

However, Sony raised its earnings forecast for the fiscal year through March by 38%, citing a recovery in its core electronics division amid booming Christmas sales in digital cameras and flat-panel TVs.

It now expects an annual profit of 110 billion yen ($903 million), up from an earlier forecast of 80 billion yen ($657 million).

The gaming unit, meanwhile, posted a 54 billion yen ($443 million) operating loss during the quarter, though Sony promised that business would improve by the latter half of next fiscal year.

"Start-up costs are high, and the losses [in the gaming division] will continue for some time," Chief Financial Officer Nobuyuki Oneda said.

For the last several years, Sony's biggest problem was its core electronics business, in which it fell behind Apple Inc. and its iPod portable music player and Samsung Electronics Co.'s flat-panel TV business.

The company has been engaged in a massive turnaround effort since 2005, when Welsh-born American Howard Stringer took the chief executive job. Sony has dropped unprofitable businesses, sold assets, cut jobs and closed plants.

Those actions appear to be paying off, somewhat. Sony's core electronics division reported record sales for the quarter, thanks to strong demand for its flat-panel TVs and digital cameras, helping to lift Sony's overall sales for the quarter 9.8% to 2.61 trillion yen ($21.4 billion).

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