Sony, which last week rolled out an array of new products in Australia, has admitted that it is struggling in the flat screen TV market and that profits in the PS3 and TV divisions are hard to come by. Yet despite this Sony has made a profit in the first quarter.
The Japanese company has has reported a $551.5 profit for the first quarter of the Japanese financial year. It has cited solid sales of consumer electronics and the success of “Spiderman 3” for its profits which is more than double last year’s Q1 profit. Sales were up 13.3 percent to $16.4 billion. However it does claim that it is struggling with the Sony PlayStation3 and TVs.
The consumer electronics unit reported a 77 percent increase in operating profit for the three months, ended June 30, to $705.9 million. Sony said the unit, which accounts for more than 70 percent of the company’s revenue, saw strong demand for its computers, digital cameras and camcorders.
Sony also said its earnings were helped by a weak yen, which raises the value of overseas earnings for Japanese exporters.
But not all the news was good. Sony’s TV unit posted a wider operating loss of $323.6 million for the quarter on a sales decline of 10 percent. Sony said it had to lower prices more than expected this spring as the high-definition television market grew more competitive. The company said its rear-projection television business was off, as plasma and LCD TV prices continued to drop. “Frankly, it’s going to be difficult to turn profitable in televisions this year,” said Nobuyuki Oneda, Sony’s chief financial officer.
The company said its game unit also continued to struggle, as strategic pricing of the PlayStation3 (PS3) video game console has dropped below production costs. Sony said it sold 710,000 PS3s worldwide for the quarter. A total of 4.3 million have been sold since the consoles went on sale late last year in Japan and the United States, and in March in Europe. Sony has set a goal to sell 11 million PS3 machines for the fiscal year through March 2008.
The PS3 has fared better in the United States since Sony cut the price of the 60GB version by $100 two weeks ago, and the company believes interest will rise with the launch of a model with an 80GB hard drive. “Thanks to these measures, PS3 sales are picking up pace,” Oneda said.
While operating losses in the game division were $242 million (29.21 billion yen), compared to 26.8 billion yen a year ago. That means the loss widened even as Sony expanded its installed base and sold more games. No doubt that is painful, but as Jack Tretton, head of Sony’s U.S. games division, said in an interview, it’s a period of investment. Fortunately the rest of Sony is performing well enough to carry the games losses, as Tretton also said.
Late last week, rival Nintendo reported a five-fold increase in quarterly profit as it continued to cash in on the popularity of the Wii game console and the DS handheld console.
The Japanese games firm has sold 9.27 million Wii machines since their launch eight months ago and expects to sell a total of 16.5 million by the end of next March, 2.5 million more than forecast. It has also sold 47.27 million DS consoles since they went on the market in late 2004.