Sony profits drop 72%; outlook dim

Sales are flat, hit by strong yen vs. dollar, euro

TOKYO -- Sony Corp. posted a 72% drop in net profit in the three months ending Sept. 30, as the company suffered flat sales affected by a stronger yen and was hit by the inclusion of results from Sony Ericsson and Sony BMG for the first time.

Net profit fell to 20.8 billion yen ($214.4 million) on sales of 2.07 trillion yen ($27.8 billion), down 0.5% from the same period a year earlier. Operating income fell 90% from the same period in 2007.

Slower demand for digital cameras and flat-screen TVs saw the company keep its annual profit outlook of a 58% decline. Sony CFO Nobuyuki Oneda painted a gloomy year-end picture.

"If today's forex conditions -- 97-98 yen to the dollar -- continue, full-year earnings would have to be revised downward by another 70 billion yen ($720 million)," Oneda said, adding that Sony could hedge to offset losses of about 30 billion yen ($308 million).

Sony shares are down 68% since the start of the year, sliding faster than the underlying Nikkei stock index, which has lost 56% in the same period.

Results were further hit by losses at the mobile communications company Sony Ericsson and at music subsidiary Sony BMG, whose business was recorded as part of Sony Corp.'s operating income for the first time.

Sony BMG sales were down 11% over the same quarter in 2007 as a decline in physical music sales and a lack of big releases led to a $45 million loss.

Only faint bright spots from Sony's gaming and pictures segments tempered the earnings downside.

Sony Pictures posted a 3.4% rise in quarterly sales to 196.1 billion yen ($2 billion) on the back of a strong worldwide showing from "Hancock," "Step Brothers" and "Pineapple Express." Home entertainment contributions came from "21" and "Vantage Point."

Losses in the gaming segment narrowed to $379 million in the quarter on a 10% increase in sales. Sales of PlayStation 3 and PlayStation Portable hardware grew. The PS3 was still slightly outsold by the older PS2.

Sony said that the video download service for the PS3, launched in July in the U.S., was going well but gave no sales figures.

Although PSP hardware sales grew to 3.18 million units, software sales for the portable console fell by 800,000 units, to 11.8 million.

Reuters contributed to this report.
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