Japanese electronics giant Sony yesterday reported an 8.6 per cent slide in quarterly profit that beat forecasts but illustrated the impact of a strong yen and falling LCD TV prices on earnings.
The maker of Bravia televisions and Cyber-shot cameras also cautiously maintained an earlier annual profit forecast and downwardly revised its revenue outlook.
However, strong operating profit on sales of PlayStations and software titles helped boost the bottom line.
Sony reported a net profit of 72.3 billion yen for the fiscal third quarter ended December, or $893 million based on its average exchange rate for the period, which beat analysts’ average expectations of a 66 billion yen profit.
But it was below the 79.2 billion yen posted in the same period a year earlier.
Sony maintained its profit forecast for the year at 70 billion yen. Its outlook is based on the assumption the dollar will average 82 yen and the euro will average 110 yen for the January to March quarter.
With the majority of its sales generated outside Japan, Sony has found itself exposed to the recent strength of the yen, which makes products more expensive overseas and erodes profits when repatriated.
In addition, electronics makers such as Sony are finding the flat screen television market challenging as heavy competition forces prices down, squeezing margins.
“We are looking at the fourth quarter conservatively,” Sony chief financial officer Masaru Kato told reporters at a news conference. “The LCD television business will be as tough as ever.”
Operating profit at the main Consumer, Professional and Devices group responsible for TV sets and Cyber-shot cameras fell 47 per cent to 26.8 billion yen.
Sony said its television business is struggling under the weight of fierce competition and falling prices and it is holding more inventory than it had previously forecast.
“We might consider pushing back new TV products for 2011 into the fourth quarter,” said Mr Kato.
Under chief executive and president Howard Stringer, the company has streamlined operations and cut costs to pare the sprawling group, which was battered by the global downturn.
The electronics giant has been forced to undergo major restructuring –slashing thousands of jobs, selling facilities and turning to suppliers for parts – after seeing losses pile up as the financial crisis hit demand.
“We are still on the road to full recovery, but we are standing on a stronger footing,” Mr Kato said.
Sony shares closed 0.73 per cent higher in Tokyo trade yesterday ahead of the earnings announcement.
The firm’s Networked Products and Services division responsible for PlayStation games and Vaio computers reported operating profit more than doubled to 45.7 billion yen, helped by PS3 cost reductions and stronger software sales.
The company last week unveiled a new portable touchscreen gaming console as it looks to launch a fresh challenge to Nintendo and Apple in the competitive mobile gaming market.