The Wall Street Journal-20080201-Sony-s Net Rises 25- as PlayStation Turns a Profit

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Sony's Net Rises 25% as PlayStation Turns a Profit

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TOKYO -- Sony Corp. reported a 25% increase in quarterly earnings as its PlayStation videogame unit turned profitable, but strong overall demand for its products was overshadowed by the effect of skittish markets on some businesses.

The electronics maker said its financial unit was hurt by the declining value of stock investments in the past few months, while a stronger-than-expected yen diminished the value of its overseas sales when converted into yen. About 85% of Sony's electronics revenue comes from outside Japan.

The company said the two factors would hurt its ability to meet its goal of a 5% annual operating profit margin, which measures the difference between the cost of making products and what they sell for. The target was core to Sony's three-year restructuring plan, which ends this March.

Sony cut its forecast for overall operating income for its fiscal year ending March 31 by 9% to 410 billion yen ($3.85 billion).

The company said demand for its products was still strong, despite concerns about an economic slowdown in the U.S.

Signs of a slowing economy and the appreciation of the yen have cast a cloud over Japan's electronics industry, which enjoyed strong earnings growth during the past couple of years.

Sony's rival, Matsushita Electric Industrial Co., also reported quarterly results yesterday, saying net profit increased 46%. But it held off from raising its full-year forecast because it was uncertain about the current quarter.

Sony said net profit rose to 200.2 billion yen for the third quarter, which ended in December, from 159.9 billion yen a year earlier. Sales rose 9.6% to 2.9 trillion yen.

The PlayStation unit reported a quarterly profit for the first time in two years. The unit reported an operating profit of 12.9 billion yen, in contrast to a loss of 54.2 billion yen a year earlier. Sales jumped 31% to 581.2 billion yen as sales of all of its videogame devices increased.

The PlayStation3, which is packed with sophisticated technologies like a Blu-ray disc player and a powerful processor, had been slow to take off since it launched in 2006, especially compared with the more popular Wii game machine by competitor Nintendo Co. Microsoft Corp.'s Xbox360, which launched a year earlier, enjoyed the advantage of having a bigger library of games. Sony was helped by the introduction in November of a new model that was more affordable and less expensive to make.

Though PS3 sales more than tripled from the previous quarter, the company said it would be unable to offset the slow growth in the first half and cut its sales forecast for the year to 9.5 million units, which is more in line with analysts' expectations than its previous forecast of 11 million units.

The electronics business, which contributes more than 70% of Sony's sales, reported a 6.9% decline in operating profit to 166.5 billion yen, as prices of television sets declined at a faster rate than expected. Sales rose 10% to 2.1 trillion yen.

The company's financial-services unit reported an operating loss of 4.2 billion yen, as revenue declined 21% to 135.9 billion yen.

Matsushita, which announced recently that it would change its name to Panasonic, said its net profit for the October-December quarter rose to 115.2 billion yen from 78.7 billion yen due to strong demand for appliances and flat-panel TV sets. Sales fell 4% to 2.3 trillion yen because the total no longer includes revenue from Victor Co. of Japan, which is now an affiliate rather than a subsidiary.