Sony film unit, electronics boost Q3

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TOKYO -- Sony Corp. on Tuesday posted better-than-anticipated fiscal third-quarter financial results thanks to strong film figures and a turnaround at its electronics unit, though the costs associated with the launch of the PlayStation 3 video game console and weaker-than-thought PlayStation Portable sales weighed on the company's bottom line.

Based on the latest figures, the entertainment and electronics giant raised its full fiscal-year profit forecast by 38%, signaling its electronics unit's turnaround is ahead of plan.

DVD sales for "The Da Vinci Code" and "Talladega Nights: The Ballad of Ricky Bobby" and the boxoffice performance of the latest James Bond film, "Casino Royale," boosted film results, with management saying the movie division is well on track to boost its profit for the full fiscal year.

Sony reported total revenue for the three months ending Dec. 31 increased 9.8% to ¥2.61 trillion ($21.4 billion), thanks largely to record sales in its electronics unit, taking advantage of the attraction of digital cameras and flat-panel televisions.

But a record ¥177.4 billion profit in the electronics unit was unable to outweigh the games unit challenges as Sony's overall operating profit tumbled 15% and profit fell 5% year-over-year to ¥159.9 billion ($1.3 billion).

Sony's movie division had a strong quarter, returning to the black with a 46.8% increase in revenue thanks to the strong DVD sales and the solid theatrical performance of "Casino," which management highlighted as having broken Bond franchise records, and "The Pursuit of Happyness."

Television revenue also increased primarily from additional syndication for "The King of Queens." Operating income of ¥26.2 billion ($220 million) was recorded compared with an operating loss of ¥400 million in the same quarter a year ago.

Movie unit profit hit ¥26.2 billion, a turnaround from the loss reported in the same quarter a year ago. Thirteen Sony titles opened at No. 1 on the film charts last year.

Asked in a conference call with U.S. investors about the outlook for the film division in the new fiscal year, which starts April 1, Robert Wiesenthal, group executive in charge of corporate development and M&A, Sony Corp. and executive vp and chief financial officer, Sony Corporation of America, was optimistic.

With the "Open Season" DVD hitting stores now and "Casino," "The Holiday" and "Rocky Balboa" coming up, "we are going to start really enjoying the wind toward our backs in terms of a very strong DVD market for our films," Wiesenthal said.

The film release next month of "Ghost Rider" also will lay the foundations for a strong DVD performance in the new fiscal year, with the arrival of "Spider-Man 3" in May also expected to strengthen Sony's film operations, he said, even though he admitted that Sony's film release schedule is likely to be lighter in the new fiscal year.Profit from the Sony BMG Music Entertainment division increased 26% to $225 million in the latest quarter helped by cost management efforts and unquantified legal settlements, mainly with music file-sharing service Kazaa, even though revenue fell 1.6% to $1.4 billion.

While the company cited releases from such acts as Oasis and Il Divo as strong performers, Wiesenthal said "the music market is still a challenge," and the company will continue to manage its cost structure. Meanwhile, Sony Computer Entertainment reported a ¥54.2 billion ($443 million) operating loss, with the conglomerate citing the startup costs for the PS3.

"SCE has delivered 2 million PS3s since the launch in November, but the associated startup costs swelled," chief financial officer Nobuyuki Oneda told reporters Tuesday in Tokyo. "We hope the PS3 business will turn to a profit in the fiscal second-half next year as initial costs will decrease."

Management also reiterated its confidence that the PS3 will be good business over its life cycle.

In the same period of the previous year, the games division had recorded an operating profit of ¥67.8 billion, and Oneda said that sales of the PSP had been dented by stiff competition from Nintendo Co. Ltd.'s Wii console, but PS2 sales have held up better than expected.

Kyoto-based Nintendo reported last week that its profit in the latest quarter leapt 40% to ¥77.6 billion thanks to huge demand for Wii and portable DS game players.

Sony said it shipped 1.84 million PS3s during the latest quarter, but the launch was dogged by technical hitches and the system will not be available in Europe until March. The company, however, is sticking to its previous target of 6 million consoles shipped by year's end.Overall, Sony raised its profit forecast for the full fiscal year through March to ¥110 billion ($903 million), up from ¥80 billion ($657 million). The increase came even though management said it now expects a higher games unit loss for the year than previously projected, with electronics being the main outperformer compared to past estimates.

Asked about Sony's outlook for its next-generation Blu-ray Disc DVD product, Wiesenthal also expressed confidence. "We are feeling very good about Blu-ray right now, but it is early days," he said. "In Japan about 96% of the hardware being sold for high-definition format are coming from the Blu-ray family. It's a format with over 100 different (consumer electronics)  manufacturers being part of the association, and obviously we have the launch coming up in Europe for PS3."

Georg Szalai in New York contributed to this report
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