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Japanese consumer electronics Companies are reeling from a combination of a high Yen exchange rate and slowing sales this has resulted in Sony announcing a 92% drop in net profit and Toshiba a $277 loss as sales fell 7% in the third quarter.

 

Sony reported a 71% fall in net profit for the three months to the end of September, compared with the same period last year.

For the same period last year, the company posted a profit of 25bn yen.

Sony’s net profit for the quarter was 20.8bn yen, down from 71.8bn yen for the same three months last year. Sales were down 0.5% at 2.1 trillion yen.

Tough competition

Last week Sony slashed its full-year forecasts blaming the strong yen and tough price competition. It is particularly susceptible to currency fluctuations as 80% of the company’s sales are outside Japan.

And worse could be to come, as the global economic slowdown continues to take its toll on sales. “The expectations being factored in are that Christmas sales will be considerably negative,” said Nobuyuki Oneda, Sony’s chief financial officer.

Toshiba’s sales were down 5pc in the period as the global economy “entered into a recessionary phase”. The company added: “The Japanese economy, impacted by the slowdown in the global economy, is entering an extremely severe economic slowdown that will see declines in corporate profits and stagnant consumer spending.

“As the worldwide financial crisis continues and concerns for inflation grow, global economic trends are unclear and difficult to predict.”

 

Slower demand for digital cameras and flat-screen TVs saw the company keep its annual profit outlook of a 58% decline. Sony CFO Nobuyuki Oneda painted a gloomy year-end picture.

Nobuyuki Oneda, Sony’s chief financial officer added”If today’s forex conditions — 97-98 yen to the dollar — continue, full-year earnings would have to be revised downward by another 70 billion yen ($720 million),” Oneda said, adding that Sony could hedge to offset losses of about 30 billion yen ($308 million).

As a result of the downturn Sony shares have crashed are down 68% since the start of the year, sliding faster than the underlying Nikkei stock index, which has lost 56% in the same period.

Results were further hit by losses at the mobile communications company Sony Ericsson and at music subsidiary Sony BMG, whose business was recorded as part of Sony Corp.’s operating income for the first time.

Sony BMG sales were down 11% over the same quarter in 2007 as a decline in physical music sales and a lack of big releases led to a $45 million loss.

 

Only faint bright spots from Sony’s gaming and pictures segments tempered the earnings downside.

 

 

Sony Pictures posted a 3.4% rise in quarterly sales to 196.1 billion yen ($2 billion) on the back of a strong worldwide showing from “Hancock,” “Step Brothers” and “Pineapple Express.” Home entertainment contributions came from “21” and “Vantage Point.”

Losses in the gaming segment narrowed to $379 million in the quarter on a 10% increase in sales. Sales of PlayStation 3 and PlayStation Portable hardware grew. The PS3 was still slightly outsold by the older PS2.

Sony said that the video download service for the PS3, launched in July in the U.S., was going well but gave no sales figures.

Although PSP hardware sales grew to 3.18 million units, software sales for the portable console fell by 800,000 units, to 11.8 million.

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