Game Sales Help Sony Beat Profit Expectations
Despite a soft economy that tempered sales of gadgets, Sony Corp. on Monday posted a second-quarter profit that was higher than expected, citing aggressive cost cutting and strength in its video games business.
The Tokyo-based media and consumer electronics giant also slightly lowered its revenue forecast for its fiscal year, citing consumer skittishness in the United States and Europe.
Spending on electronic gizmos, which constitute the bulk of Sony’s business, tends to rise or fall with consumer confidence, which hit a nine-year low in the U.S. last month.
“We are concerned that consumer confidence may deteriorate further,” said Nobuyuki Idei, chairman and chief executive.
In the second quarter ended Sept. 30, Sony reported net income of $361 million, or 37 cents a share, on sales of $14.7 billion. In the same period last year, Sony recorded a net loss of $107 million on sales of $14.6 billion. Analysts had expected net income of $141 million.
“They’re definitely doing better than they were a year ago,” said Morningstar Inc. analyst David Kathman.
Reflecting its cautious outlook, Sony took down its rev- enue forecast by $819 million to $62 billion for its fiscal year ending March 31.
Net income for the year, however, is expected to grow $245.9 million to about $1.5 billion. That gain primarily will come from a weaker yen, which increases the value of sales from outside Japan. Sony rings up 70% of its sales in non-Japanese markets.
Sales in its consumer electronics division, which account for more than two-thirds of the company’s revenue, fell 5.5% to $8.8 billion.
Brisk sales of Sony’s Vaio computers, Cybershot digital cameras and Clie hand-held computers helped offset deteriorating sales of cell phones and computer monitors. The division contributed the largest portion of Sony’s profit: $215 million. The results, however, reflect a tax benefit from its purchase of money-losing Aiwa Co., which added $296 million to Sony’s bottom line.
The company’s PlayStation games division was the second largest profit driver, contributing $203 million in the quarter, up fivefold from the same period last year.
Sales for the division rose 3% to $2.02 billion. Sony boosted its estimate for the number of PlayStation 2 consoles it expects to sell this fiscal year to 22.5 million units, up 13% from prior estimates.
Sony’s music business continued to lose money, its loss of $46 million topping last year’s $43 million. Album sales, however, increased, thanks to new releases such as Bruce Springsteen’s “The Rising” and the Dixie Chicks’ “Home.” Revenue rose 1.6% to $1.04 billion.
Citing the high cost of marketing its summer films, Sony reported a 55% drop in operating profit to $81 million this quarter for its movie business. Sales for Culver City-based Sony Pictures Entertainment rose 26.6% to $1.5 billion on the strength of late-summer releases such as “Men in Black II,” “Mr. Deeds” and “XXX.”
Sony dominated the U.S. box office this summer, generating $1 billion in ticket sales between the May release of its blockbuster “Spider-Man” and the Labor Day weekend. It was the second-biggest quarter ever for studio revenue after the quarter ended March 2001.
While considered high even by Hollywood standards, Sony’s summer marketing expenses support two revenue streams -- theatrical and home entertainment -- the company said, noting that it expects a surge in sales when its summer movies are released on video and DVD.
Sony has shipped 25.7 million copies of “Spider-Man” DVDs and videos to go on sale Friday. “Men in Black II” will be released to the home entertainment market in November, and “Stuart Little 2” and “XXX” are set for December releases.
Sony’s American depositary receipts gained $1.23, or 2.8%, to $45.03 on the New York Stock Exchange.
