Sony Reports $330M Loss, Lower CE Sales

Tokyo — Sony reported that the continuing decline of television sales, as demand shifted from CRT sets toward flat-panel and plasma units, accounted for a 1.4 percent decrease in fiscal first-quarter sales and a $330 million loss in its consumer electronics business.

Sales dropped to $10.1 billion in the three months ended June 30, down from $10.2 billion in the year-ago period, as the newer digital TV models faced intense selling competition.

An ongoing decline in CE unit selling prices, as well as a drop in sales to outside customers, despite favorable foreign exchange rates, moved the CE segment into the red, with Sony reporting a first-quarter operating loss of $330 million for its electronics group, compared with operating income of $73.9 million in the same quarter the previous year.

The operating loss within the CE business was specifically attributed to LCD televisions and CCDs, which were both impacted by a decline in unit selling prices. On the other hand, Sony said its Vaio PCs experienced an increase in operating income due to “good sales performance.”

Sales of televisions in the first quarter declined 20.5 percent, hitting $1.4 billion, down from a year-earlier $1.7 billion. Audio products sales in the first three months declined 12.7 percent, reaching $1.1 billion, compared with $1.2 billion in the first quarter of last year. Video sales in the quarter were flat, at $2.3 billion.

Sales in Sony's game segment jumped 64 percent in the first quarter, climbing to $1.6 billion, from $938.2 million in the same three months year-on-year. Hardware sales increased in the United States due to growing business for PlayStation2, while overall growth of software sales also contributed to the sales gain.

However, the game segment more than doubled its operating loss to $54 million in the first quarter, compared with an operating loss of $25.8 million in the same three months in 2004. The wider loss was due mainly to increased expenses reflecting advertising and marketing decisions, as well as added costs for aggressive research and development.

Sony first-quarter sales in the United States were flat overall, coming in at $3.8 billion.

The sliding sales and prices for TVs and audio equipment, combined with larger-than-expected restructuring costs and growing competition for CE products being produced more cheaply by competing Asian manufacturers pushed down consolidated Sony first quarter sales and earnings. The company said dropping prices and costs for propping up its consumer products business accounted for a first quarter loss. At the same time, Sony slashed its full-year profit outlook by nearly 90 percent.

Consolidated sales in the first three months hit $14.2 billion, a 3.3 percent slide from the $14.4 billion reported in the opening quarter of last year.

Sony recorded a first-quarter operating loss of $139 million, compared with operating income of $87.2 million the previous year. Net loss for the first quarter reached $66 million, compared with net income of $207.4 million in the same period in 2004. The company reported restructuring charges of $144 million in the quarter, up from $106.8 million in the first quarter a year ago.