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Sony squeezes out a profit

A fourth-quarter turnaround leads to a tripling of annual earnings. But the future isn't so bright.

May 15, 2008|From the Associated Press

TOKYO — Sony Corp. punctuated its recovery by swinging to a profit for the January-March quarter as it reduced losses from its PlayStation 3 video game business.

Strong sales of flat-panel televisions and digital cameras also helped nearly triple annual profit to a record, the electronics and entertainment company said Wednesday.

But Sony joined Japanese automakers Toyota Motor Corp. and Honda Motor Co. in forecasting lower profit for the fiscal year through March 2009, citing the strong yen's erosion of overseas earnings.

Sony had been battered by a recent fall in electronics prices and the bumpy start of its PlayStation 3 video-game console, which required enormous start-up costs and struggled against the Wii game box from rival Nintendo Co.

The last time Sony set a record with its annual profit was a decade ago, Chief Financial Officer Nobuyuki Oneda said.

For the fiscal fourth quarter, Sony posted a profit of 29 billion yen ($276 million), a reversal from a loss of 67.6 billion yen in the same period last year.

For the financial year through March, Sony earned a better-than-expected profit of 369.4 billion yen ($3.5 billion), a record for the company known for its Walkman portable players and "Spider-Man" movies. That's nearly triple the 126 billion yen earned in the previous fiscal year.

Quarterly sales dropped 6.5% to 1.95 trillion yen ($18.6 billion).

Sales were solid in liquid-crystal display TVs, digital cameras and Vaio computers, the Tokyo-based manufacturer said.

But sales of mobile phones, old-style picture tube TVs and PlayStation 2 machines declined.

For its quarterly operating performance, which measures how a company did in its core operations, Sony lost 4.7 billion yen ($44.9 million), although that was still an improvement from a much larger operating loss of 113 billion yen in the year-ago period.

For the fiscal year through March 2009, though, Sony expects profit to slide 21.5% to 290 billion yen ($2.8 billion) with a 1% increase in sales to 9 trillion yen ($86 billion).

The biggest obstacle is the unfavorable currency swings that are expected in months ahead, the company said.

Sony is expecting the dollar to trade at about 100 yen for the current fiscal year. The dollar, which traded at an average of about 114 yen last year, fell below 100 yen earlier this year and is now trading at about 105 yen.

Sony still expects the PS3 business to become profitable sometime in the fiscal year ending March 2009, it said.

Sales for its movies unit declined 11% in the fiscal year ended March 31 because fewer films were released compared with the previous year.

Releases for the fiscal year just ended that contributed to theater and home entertainment revenue included "Spider-Man 3" and "Superbad," according to Sony.

Sony's music business fared better compared with the previous year, boosted by best-selling albums.

Sony's results reflect its equity holdings in major joint ventures, such as Sony BMG Music Entertainment, which saw success with Avril Lavigne's "The Best Damn Thing" and Alicia Keys' "As I Am" hit albums.

But equity-related income declined from Sony Ericsson Mobile Communications because of greater research and development costs, it said.

Sony's latest results were improved by the sale of assets, including its former headquarters in Tokyo, and the absence of expenses for a massive battery recall that hit the previous year.

In the previous year, Sony recalled millions of lithium-ion laptop computer batteries suspected of defects that caused them to burst into flames in some cases.

Sony shares rose 1.3% to close at 4,850 yen ($46) on Wednesday. The earnings were announced shortly after markets closed.

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