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Sony Q2 CE Segment Sales, Profits Slide

Tokyo – A growing demand for flat-panel LCD televisions, that eroded sales of Trinitron CRT sets, snowballed into a 9.8 percent sales decrease for the CE segment at Sony in the company’s fiscal first quarter.

Three-month sales in the CE segment dipped to $9.2 billion, down from $10.3 billion in the year-ago period. At the same time, operating income in Sony’s CE segment fell 73.9 percent in the first quarter, down to $107 million, from $413.4 million year-on-year.

Sony barely was in the black for the three months, with consolidated net income of $9 million, down a whopping 98 percent from the $481.5 million registered in the year-ago three months. This quarter’s drop follows last year’s shocking fourth quarter earnings results, which forced Sony to roll out a $2.5 billion three year restructuring plan to improve profitability.

The combination of slumping TV sales, slowing demand for PlayStation 2 game machines and the absence of a smash movie hit, pushed consolidated Sony sales down 6.9 percent in the first quarter, ended June 30, to $13.4 billion, from $14.5 billion in the same quarter a year ago.

Consolidated operating income was off 67.9 percent in the first quarter, at $139 million, compared with $436.8 million the previous year.

Overall Sony sales in the United States in its first fiscal three months plunged 17.6 percent, down to $3.8 billion, compared with $4.7 billion in the first quarter a year earlier.

By product category, Sony TV sales decreased 15.5 percent in the first quarter, to $1.5 billion, down from $1.8 billion in the same quarter in 2002. The segment accounted for a $43 million operating loss in the first quarter, compared with operating income of $70.7 million in the same quarter last year.

A slide in portable audio and home audio products pushed the audio category down 11.9 percent in the first quarter, to $1.2 billion, compared with $1.4 billion year-on-year. Operating income in the category reached $64 million, down 48.5 percent from the $126.3 million earned in the first fiscal quarter of 2002.

The video category, however, reversed the negative sales slide, coming in 2.7 percent higher in the first quarter, at $1.9 billion, up from $1.8 billion the previous year. Operating income still decreased, down 30.9 percent, to $235 million, from $343.6 million in the first quarter a year earlier.

Sony also noted a large decrease in sales of VAIO personal computers, but large sales increases in digital cameras and cellular phones.

In Sony’s game segment, both hardware and software sales decreased in the first quarter, hit hard by slowing sales of PlayStation 2 hardware in the United States. U.S. software revenue decreased, due to a drop in unit sales. Worldwide shipments of PlayStation 2 were off just under 2 billion units, as movement slowed to 2.65 billion units.

Total game segment sales decreased 18.2 percent, down to $1 billion, compared with $1.3 billion in the same three months last year. Operating income for the game segment dipped 31.6 percent, reaching $15 million, compared with $21.9 million year-on-year.

Sony offered no change in its fiscal year outlook for the 12 months ending in March 2004. Sales for the 12 months are anticipated at $62.3 billion, down 1 percent, with operating income off 30 percent, to $1.1 billion. Sony expects a 12-month net of $421 million, down 57 percent. Restructuring expenses of $1.2 billion are included in this forecast.

Sony plans capital expenditures of $2.9 billion in the fiscal year, an increase of 34 percent year over year.