Sony profit down on PS3, outlook raised

Sony Corp. posted a 15 per cent fall in quarterly operating profit yesterday after massive losses at its game unit offset robust sales of flat TVs, but it raised its annual outlook closer to market expectations.

Sony, which vies with Samsung Electronics Co. Ltd and Sharp Corp. in the $63 billion liquid crystal display (LCD) TV market, enjoyed brisk demand for its Bravia flat panel televisions as well as for Cyber-shot digital cameras.

But gains in its mainstay electronics division were cancelled out by hefty losses at its game unit, which was weighed down by heavy start-up costs for its new PlayStation 3 (PS3) game console and sluggish demand for PlayStation Portable (PSP) handheld gear.

"It's a positive development that the company increased profits on electronics even as their prices fell during the holiday sales period," said Mizuho Investors Securities analyst Mitsuhiro Osawa.

"Of course we cannot ignore the game machines... It's too early to say Sony has been reborn."

Sony raised its operating profit forecast by 20 per cent to 60 billion yen ($490 million) for the full year to March, still short of a consensus of a 69.2 billion yen profit in a poll of 21 analysts by Reuters Estimates.

The latest forecast compares with a 226.42 billion yen profit last business year.

Its annual net profit forecast, however, was raised by a larger 38 per cent to 110 billion yen after a strong quarterly performance by its mobile phone joint venture with Ericsson, beating a consensus of 104 billion yen.

"I think the stock price has largely factored in a forecast revision," said Shigemi Nonaka, special adviser at Polestar Investment Management.

"The stock had seen a lot of buying up until today... I don't think the stock will be too much influenced by this."

Sony shares have gained 10.4 per cent so far in January as investors anticipated solid third-quarter results, far outperforming the Tokyo stock market's electrical machinery index, which edged 0.4 per cent higher.

For October-December, operating profit came to 178.91 billion yen, down from 210.35 billion yen a year earlier. Net profit fell 5.3 per ent to 159.92 billion yen, but sales rose 9.8 per cent to a record 2.61 trillion yen.

The profit slide in the just-ended quarter was expected as the Tokyo-based company had said losses at its game unit would balloon to about 200 billion yen for the year to March.

The Blu-ray high-definition optical disc drive and other cutting-edge technology used in the PS3 drove up production costs of the game machine, leading some analysts to think it could hurt Sony's bottom line for years to come.

Sony now makes a loss on each PS3 it sells.