Sony halves losses, returns to operating profit

Cost-cutting measures begin to take effect

TOKYO -- Sony more than halved its net annual losses to 40.66 billion yen ($439 million) and managed to return its underlying business operations to the black with an operating income of 31.8 billion yen on the back of stringent cost reductions. Meanwhile, the loss for the fourth quarter was reduced by two-thirds to 56.6 billion yen compared to last year.

“We have turned a corner in terms of achieving positive cash flow,” said chief financial officer Nobuyuki Oneda, who predicted Sony would post a net profit this year fiscal year of 50 billion yen through a push on 3D contents and hardware products.

Profits at the Pictures division jumped 43% to 42.8 billion yen even though sales fell slightly to 705 billion yen. The division's bottom line was boosted by the disposal of stakes in HBO Latin America, HBO Central Europe and Game Show Network in the U.S.

High income from hits such as “2012,” “Angels & Demons” and “Michael Jackson's This Is It” was somewhat offset by a fall in home entertainment income after a strong fiscal 2008.

Higher advertising revenues from international operations including the broadcast of Indian Premier League cricket, increased television income.

Sales at Pictures are expected are expected to drop again this fiscal year due to a lack of blockbuster titles in the pipeline.

Losses at Network Products & Services narrowed slightly to 83.1 billion yen even as sales of games and Vaio computers fell just over 10%.

“The negative margin issue on the PS3 has been resolved,” said Oneda referring to the fact that Sony no longer loses money on each PlayStation 3 that is sells, “and this will contribute to the game division going into the black this year.”

Sales at Sony Music were up due to the fact that this was the first full-year Sony Music Entertainment (SME) was a wholly owned subsidiary. Sony took over BMG's stake during the previous year. Real sales were down 5% despite strong performances from Michael Jackson's back catalog as well as hit albums from Susan Boyle and Alicia Keys.

Overall sales fell 6.7% to 7.21 trillion yen in yen, but only 1% on a local currency basis. The continuing strength of the yen hits Sony across the board when it repatriates income from its huge overseas sales.

CFO Oneda, who retires this year after more than two decades with Sony, said that although they “haven't calculated an exact monetary impact of 3D, Sony is aiming at an end-to-end business model from contents to delivery to hardware. So though we may be slightly behind a certain competitor in 3D, we are not worried because we have the whole package.”