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Sony CE Segment Profits Rise

Tokyo – A positive profit picture in Sony’s consumer electronics segment was undercut by lower earnings in both its game and film categories, resulting in an overall 25 percent income decline for the company’s fiscal second quarter.

Riding the continuing success of digital cameras and making a concerted effort to cut costs, Sony’s CE segment operating income soared 36.2 percent in the second quarter, hitting $322 million, compared with $241.5 million in the year-ago period. Second quarter CE segment sales declined 1.4 percent, to $10.9 billion, from $11.3 billion year on year.

Sony said it saw the ‘beginnings of a recovery’ for its CE business, as it ‘improved the competitiveness of its products,’ and noted it will increase its range of product offerings prior to the holiday selling season. This is expected to include new LCD and plasma TVs.

Slowing sales of the PlayStation2 game console, as well as PS2 software, produced a 91.2 percent slide in operating income for the game segment in the second quarter, down to $20 million, compared with $227.7 million in the same period last year. Game segment sales dropped 35.6 percent, to $1.5 billion, down from $2.3 billion year over year.

Add to Sony’s quarterly profit problems, a $41 million loss in its film segment, compared with a year-on-year gain of $90.9 million, consolidated Sony net income decreased 25.3 percent, to $297 million, compared with $404.9 million in the second quarter of 2002.

Sony sales in the United States decreased 15.9 percent in the second quarter, ended Sept. 30, down to $4.7 billion, from $5.7 billion in the same three months in 2002. For the six months, U.S. sales were off 16.7 percent, at $8.8 billion, compared with $10.8 billion in the first half a year earlier.

Consolidated Sony sales were flat at $16.5 billion in the second three months, while consolidated operating income took a 34.3 percent tumble, to $299 million, compared with $463.6 million in the same quarter a year ago.

Restructuring charges for the current quarter amounted to $87 million, including $49 million for the CE segment.

In its CE segment, Sony praised increasing sales of cellular phones, VAIO PCs, DVD drives and flat-panel televisions, along with digital cameras, and noted that sales of CRT televisions and portable audio products had decreased.

In the first half, CE segment sales decreased 5.6 percent, to $20.8 billion, down from $22.5 billion, while operating income dropped 35.6 percent, to $438 million, from $692 million. Sales in the game segment were off 29 percent in the first half, to $2.6 billion, from $3.7 billion, while operating income decreased 85.6 percent, to $35 million, from $251.2 million.

Video, Sony’s largest CE category, recorded flat second quarter sales of about $1.95 billion. Television sales also were flat in the three months, coming in at about $1.93 billion. The audio category dropped 7.2 percent, to $1.4 billion for the period, down from $1.6 billion in the second quarter of last year.

For the six months, video sales edged up nearly 2 percent, to just under $4 billion, while television sales declined 7.6 percent, to $3.6 billion. Audio took a steeper plunge in the first half, down 9.5 percent, to $2.7 billion.

Sony, which has targeted its CE business for more than $1 billion in restructuring costs this year, has scheduled an announcement for tomorrow, when it is expected to offer details of a plan to spend in the neighborhood of $2.5 billion over three years to further restructure its CE business. This could mean additional concentration on sales of flat screen TVs, with diminishing attention to CRT types, as well as substantial employee layoffs.

Sony has cut its consolidated operating income forecast for its fiscal year, ending Mar. 31, 2004, to $1.2 billion, down 46 percent from the operating income registered previous year. Consolidated net income expectations remain firm for the 12 months, at $459 million, 57 percent below the previous earnings recorded a year earlier, while sales for the 12 months are anticipated at about $68 billion, about flat year over year.