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Sony to hit 5% profit margin

Tokyo — Sony is on target to make its 5% profit margin goal by the end of fiscal 2007, Sony CEO and chairman Howard Stringer told reporters on Tuesday in Tokyo.

Stringer noted that good news in recent weeks, including strengthening sales of the PlayStation 3 console in the U.S., Europe and Japan, has brought the 5% target closer, while noting that “exchange rate volatility and stock price fluctuations,” as well as “a dodgy U.S. economy,” may complicate matters. “The U.S. economy’s slowing hasn’t affected electronics sales so far,” he added.

Looking ahead, Stringer said that a major theme for next year and beyond will be the expansion of online networking for the PS3 console to other electronics, beginning with the PlayStation Portable. “Sony is preparing for the digital future by integrating its hardware and software in a digital environment,” he said. Noting that the “wherewithal to connect our many devices” already exists, Stringer said that the “next goal is digital (networking). We have the tools; we now have to demonstrate what we can accomplish.”

Stringer also said that Sony “has no interest in selling its entertainment companies,” saying that they are essential for Sony’s hardware-software digital networking strategy.

Asked to comment on the viability of Hollywood product in a more competitive global film market, Stringer said that “Hollywood has always been able to do one thing better than anyone else — produce movies that are global events.” He also noted the continuing global B.O. strength of U.S. stars. “Around the world a star is still a star,” he explained, “but not in the U.S. so much anymore.”

But for producers and distribs of content, in Hollywood and elsewhere, the challenge of digitalization is “proving difficult,” he added. Noting the steep decline of profitability in the music biz, he said that the “digital offsets — revenues from Internet advertising and so on — don’t come close to making up for the loss.”

Sony’s advantage in this difficult environment, says Stringer, is that it is not dependent on content alone. “We have a global hardware market that makes us more competitive in a lot of countries,” he said, pointing to Sony’s growing presence in China, India and Russia. “We can become even stronger in (these three markets) and generate significant profits for Sony over a long period,” he added.

Yet another Stringer priority is technological innovation — long a Sony strength that Stringer has tried to encourage in his tenure. While admitting that “big companies have a hard time being as innovative as smaller companies,” he pointed to Sony’s new Rolly music player and OEL (organic electroluminescent) television as proof that the company still can still generate what he called “the ‘wow’ factor.” “(Innovation) is important for us socially as a company — it generates confidence,” he said.

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