Electronics puts charge in Sony Q1
Electronics puts charge in Sony Q1TOKYO -- While film results were a mixed bag, improvements in its long-beleaguered electronics unit helped Sony Corp. swing back into the black in its fiscal first quarter, with the entertainment and electronics giant reporting a better-than-expected ?32.3 billion ($281 million) profit for the period ending June 30.
For the year-ago period, the company recorded a ?7.3 billion loss.
Sony's revenue rose 11.2% year-over-year, or 6% on a local currency basis, to ?1.7 trillion ($15.2 billion).
Video game results fell in the fiscal first quarter, with the company also reporting a loss for the Sony BMG music joint venture, which a European court recently argued should be broken up. Gaming observers were pleased that management said Thursday that its PlayStation 3 console is on track to be launched in time for the holiday shopping season.
"The Da Vinci Code," which raked in more than $740 million in worldwide boxoffice receipts, helped Sony's film division to a 41.8% leap in quarterly revenue to $1.8 billion. Home entertainment revenue also increased on higher DVD sales of such acquired product as "Hostel" and "Final Fantasy VII: Advent Children."
The film unit reported an operating loss of ?1.2 billion ($10 million) during the latest quarter, compared with a year-ago profit of ?4.2 billion. Sony cited "higher marketing costs incurred for upcoming second-quarter theatrical releases," like the just-released animated feature "Monster House."
Sony Corp. of America executive vp and chief financial officer Rob Wiesenthal answered questions on what investors can expect for the full year from Sony's film division during a Thursday conference call with North American analysts.
"Some of the impact you've seen to our recent (earnings) release has to do with the timing of marketing expenditure," he said. "You have to book expenses as incurred."
Looking forward, he cited the latest James Bond film ? "Casino Royale," the Will Ferrell starrer "Stranger Than Fiction" and Sony's first major computer-generated release "Open Season" as key titles. "The pictures company will have a terrific finish to the year," Wiesenthal said.
Sony expects profits in its film division in both remaining quarters of 2006, Wiesenthal said.
Production costs for new network series for the upcoming fall TV season also hit the bottom line.
Chief financial officer Nobuyuki Oneda said Thursday that television revenue from international channels rose in the latest period, but this was not enough to offset the film unit losses, either.
Sony also booked an equity loss of ?2.6 billion ($22 million) for MGM, which was better than the ?6.5 billion loss a year ago. A consortium led by Sony completed the acquisition of MGM in April 2005, and Sony records 45% of MGM's profit or loss. This means that MGM's loss in the latest quarter came in at about $48.9 million.
With the quarterly results in most units being mixed, Sony relied on a 13.5% revenue leap in the electronics division, boosted by sales of liquid-crystal display television sets, digital cameras, camcorders and laptop computers, particularly the Vaio range. That helped turn a ?26.7 billion loss a year ago into a ?47.4 billion ($412 million) electronics profit this time around.
The multimillion-dollar advertising campaign for Bravia television sets appears to have paid off, while ongoing cost-cutting measures also were identified as having contributed to the positive results.
With an operating profit of ?27.1 billion ($232.5 million) ? far above the anticipated ?18 billion forecast and a turnaround from the ?6.6 billion loss a year ago, Sony on Thursday also boosted operating profit guidance for the full fiscal year 30% to ?130 billion ($1.1 billion), with accounting changes also playing their part on the final figures. The conglomerate did not raise its net profit guidance.
Under the tutelage of chairman and CEO Howard Stringer, Sony has been closing manufacturing plants and cutting back on personnel costs, and the market reacted positively to the latest quarterly results. The company's shares in Tokyo closed up 2.2% Thursday at ?5,020 ($43.38). In New York, its American depository shares finished up 6% at $45.51, its biggest single-day gain since January. While still lagging behind its levels from several years ago, the stock is up about 30% since Stringer took over.
Oneda confirmed Thursday that the launch of the PlayStation 3 game console in November is on target. It will go head to head with Nintendo's Wii and Microsoft Corp.'s Xbox 360.
The gaming division's revenue fell 29.1% in the fiscal first quarter to $1.1 billion because of a decline in sales of PlayStation 2 consoles, as well as falling sales for the PlayStation Portable hand-held device, Oneda said. The weaker revenue increased the games unit's loss from ?5.9 billion a year ago to ?26.8 billion ($233 million).
American Technology Research analyst P.J. McNealy said Thursday that Sony "appears to be sitting on finished PlayStation Portable hardware inventory," which he added "suggests a PSP price cut is coming, and likely in the next quarter." A price cut on the company's portable gaming devices, McNealy said, could fight competition from Nintendo. Nintendo's DS Lite product had a big North American launch in June, pressuring sales of the PSP there, and earlier in Japan.
Meanwhile, Sony said the Sony BMG music venture posted a 14.4% revenue decline to $872 million, with its loss ballooning from $18 million a year ago to $81 million. The company pinned the deterioration in sales on the delay of several key releases into the second half and continuing sluggishness in the music industry.
Sony BMG's best-selling albums in the quarter included Dixie Chicks' "Taking the Long Way" and Tool's "10,000 Days."
After a recent European court ruling that unraveled the approval of the Sony BMG merger, analysts asked Wiesenthal how the music business might be impacted. "We're studying the judgment very carefully," he said. "But in terms of our ongoing business, we're operating as we should and do not expect any impact in how we handle operations in any material way."
Executives cited important albums set for U.S. release following the summer from Christina Aguilera, Bob Dylan and Beyonce as a brighter point.
Lora Kolodny and Georg Szalai in New York contributed to this report.