Sony Posts Profit Gain Despite Film Flops

Sony Corp.’s attempts to turn around its electronics business paid big dividends during the holiday season, putting the company solidly in the black with record results in a quarter in which it had warned of a loss.

Strong sales of Sony’s new Bravia liquid crystal display TVs and its popular PlayStation Portable hand-held game system fueled an 18% rise in fiscal third-quarter profit, to $1.4 billion. Revenue also hit a record, climbing 10% to $20.1 billion.

The Japanese company got a big boost from a favorable exchange rate. The weak yen inflated profit brought back into the country and hiked the value of sales, most of which came from overseas.

Sony raised its guidance for the fiscal year ending March 31 to a profit of $602 million from a loss of $86 million, and investors cheered the news. Sony’s U.S.-listed shares surged $5.28, or 12%, to $48.57, their highest level since mid-2002.

The improved results were blunted by a continued slump in Sony’s entertainment operations. Sony Pictures Entertainment, based in Culver City, was plagued by a dearth of hits in 2005, with no “Spider-Man” to offer and a string of bombs such as “Stealth.”

In the quarter ended Dec. 31, the film unit reported a $3-million operating loss caused by such box-office duds as “The Legend of Zorro” and “Zathura.” Its $1.7 billion in sales was down less than 1% from a year earlier, when “Spider-Man 2” was released on DVD.

“The entertainment side always struts bigger,” said Richard Doherty, an analyst with Envisioneering Group in Seaford, N.Y. “And when it’s successful, it’s really successful. ‘Spider-Man’ really paid back on its investment. So did ‘Spider-Man 2.’ When it flops, it’s ‘Stealth.’ ”

Music sales were flat, but that was better than the industry overall. Sony BMG, its joint music venture with Bertelsmann, reported third-quarter sales of $1.5 billion, down less than 1% from a year earlier. Earnings were $178 million, up from $157 million, helped by cost cutting and album sales by Kelly Clarkson and Kenny Chesney.

Sony Chairman Howard Stringer is executing a sweeping restructuring of the struggling electronics and entertainment giant, with his efforts focused on reviving its electronics business that has long accounted for more than half of the company’s revenue.

“The new company that Stringer and his team are trying to build is a digital company,” said Mark Stahlman, a financial analyst with Caris & Co.

Sony’s television division was a symptom of Sony’s lethargic culture. Once an industry leader, it clung to cathode-ray televisions when consumers were gravitating to flat-panel TVs. Sony formed a joint venture with South Korea’s Samsung Electronics to produce LCD displays in 2003. In September, it unveiled the new Bravia line, which it promoted heavily among women, who increasingly influence big-screen TV purchases.

“The Bravia line came from nowhere in very late summer and became the most profitable line in the industry,” Doherty said. “That’s a big part of this good news from them today.”

Sales for the electronics division increased 4.7% to $13.5 billion, fueled not just by LCD televisions but by Sony’s Vaio line of notebook computers, Walkman digital audio players and Handicam video cameras. Operating income for the quarter rose 56% to $668 million.

The games division reported a 48% surge in sales compared with the prior holiday season, buoyed by the popularity of its PSP hand-held game system, which sold 6.2 million units, outstripping sales of PlayStation 2 consoles. Operating profit for the division rose 52% to $575 million on sales of nearly $3.6 billion.