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Sony CE Segment Sales Off 2.5%

Tokyo — A significant decline in intersegment sales to its games operation translated into a 2.5 percent drop in consumer electronics sales in the fiscal second quarter at Sony, coming in at $10.9 billion, down from a year-ago $11.7 billion.

This sales decline was due to the outsourcing of Playstation2 game console production to Chinese manufacturers.

For the second consecutive quarter, Sony sales of flat-panel and LCD rear-projection televisions and digital still cameras increased, while sales of portable audio and CRT televisions decreased.

Sony video category sales in the second quarter, ended Sept. 30, climbed 13.5 percent, reaching $2.2 billion from a year-earlier $2 billion. Television sales edged upward 1.4 percent in the second three months to $1.97 billion, while audio products slipped 14.2 percent to $1.3 billion from $1.6 billion.

A combination of higher costs, falling prices, appreciation of the Japanese yen and restructuring charges delivered an 83.4 percent decrease in operating income for Sony’s CE segment, dropping to $65 million from $405.9 million in the second quarter in 2003.

Second-quarter game segment sales were off 25.8 percent to $1.1 billion from a year-ago $1.5 billion, due to a decrease in sales of hardware, despite an increase in sales of software. A small game segment operating loss incurred in the second quarter, compared with a year-on-year $20.7 million gain, due to a decrease in hardware sales, despite an increase in software sales revenue.

For the six months, Sony CE sales dipped 1.4 percent to $21.1 billion from a year-ago $22.3 billion, while game segment six month sales dropped 21.5 percent to $2 billion from $2.7 billion.

CE operating income for the six months was off by 72.9 percent, coming in at $142 million, down from $545.1 million in the same period last year. The game segment for the six months registered a $26 million loss, compared with income of $37.1 million year-over-year.

In the first half, video category sales climbed 12.7 percent, hitting $4.5 billion, up from $4.1 billion in the same period a year earlier. Television sales rose 3 percent to about $3.8 billion, while audio sales dropped 13.1 percent to $2.5 billion from $3 billion in the same six months last year.

Sony sales to the United States declined 11.6 percent in the second quarter to $4.1 billion from $4.9 billion, while six month total sales to the United States were off 10.4 percent to $7.9 billion from just over $9 billion.

With lower second-quarter sales in its music segment factored in, Sony consolidated sales for the three months dropped 5.3 percent to $15.3 billion from $16.9 billion in the year-ago quarter. Music segment sales decreased 41.5 percent in the second quarter to $526 million from $937.7 million a year earlier. However, the segment posted operating income of $20 million in the three months, compared with an operating loss of $55.4 million in the second quarter a year earlier.

Even with the consolidated second quarter sales slide, Sony posted a 30.6 percent increase in consolidated operating income, rising to $391 million in the quarter, up from $311.9 million in the same period in 2003. The increase was due primarily to a significant improvement in the profitability of the company’s pictures business segment, namely its Spider-Man 2 movie.

Consolidated net income jumped 61.6 percent in the second quarter, reaching $479 million from a year-ago $309.1 million, due to the contribution of equity in net income from its joint mobile phone venture Sony Ericsson. Sony reported $169 million in quarterly restructuring charges, compared with a year-over-year $91.1 million.