Sony posts loss; Nintendo cuts outlook

Sliding demand and a stronger yen to hurt both firms

TOKYO -- A strong yen did Sony no favors in the third quarter, combining with a weak economy to send net profit plummeting 95% to $114 million, the company said Thursday.

Revealing its numbers for the October-December period, the company also reiterated its recently revised forecast of a $1.7 billion loss for the full year ending in March.

Sony's revenue was down 25% to 215 billion yen ($23.68 billion) as the company was slammed by both the global downturn and the strong yen. Sales in local currency terms were down just 9%, but the yen's sharp rise against other currencies, particularly the greenback, accounted for the difference.

The company reported an operating loss of $197 million, with the bottom line saved only by successful currency hedging. A Sony spokesperson told The Hollywood Reporter that the company made a gain of $877 million on foreign exchange hedging during the quarter

Revenue at Sony Pictures fell 22%, despite being down only 8% in dollar terms. The release of new Bond film "Quantum of Solace" provided the division's brightest spot, helping to boost operating income 6% -- though this translated to an 8% decline in yen.

Robert Wiesenthal, group executive, head of corporate development and M&A for Sony Corp. and CFO of Sony Corp. of America, told analysts in a conference call that current weakness in DVD sales is due to the challenging economy and retail trends. "There is still a lot of impulse purchase of DVDs and CDs, but with less traffic in the stores," he said. He also said there is "a lot of momentum" for Blu-ray Discs.

Asked about film financing, he said Sony is set for the coming years. "In terms of new film financing, that market is pretty much shut down," though, he said.

While there was no home entertainment release to match 2007's release of "Spider-Man 3," an increase in the sale of Blu-Ray players provided an up note for the electronics division.

And despite falling sales for its PS3 and PlayStation Portable consoles, the games division would have stayed in the black were it not for currency fluctuations, the company said. Still, CFO Nobuyuki Oneda conceded that Sony's consoles have proved less recession-proof than its rivals.

Rival Nintendo, meanwhile, which on Thursday cut its own full-year outlook for the second time in three months, posted a 21% jump in operating profit for the quarter, benefiting from strong holiday sales of its Wii game console and DS handheld game player.

The video game manufacturer cut its profit forecast by a much larger-than-expected 16% while lowering its sales target for the Wii slightly, a move that could raise worries over its growth potential.

"It will be a major shock for Nintendo bulls out there if they are reducing Wii unit guidance, because people expect this to go up," Hiroshi Kamide of KBC Securities said.

Nintendo's new operating profit forecast of 530 billion yen ($5.9 billion) for the year to March would still be a record figure, a sharp contrast to Sony, which is heading for its biggest operating loss on record and its first in 14 years.

October-December group operating profit at Nintendo rose to 249.2 billion yen($2.78 billion) from 205.3 billion yen a year earlier.

Before the announcements, shares in Sony closed up 4% at 1,909 yen ($21.18), while Nintendo rose 1.6% to 32,300 yen. The benchmark Nikkei average rose 1.8%.

Reuters contributed to this report.