Sony Corp. seemingly flew in the face of its own market observations Friday when, announcing its third-quarter financial results, said general weakness continued in the global economy during the last three months of 2001 and then announced it recorded its largest quarterly consolidated sales in its history for the same period.
The strong sales were largely thanks to healthy consumer spending, particularly in the U.S. during the key year-end holiday sales season, with demand for its PlayStation 2 games console and consumer audio-visual and IT equipment strong, it said in a statement. PlayStation 2 jumped as two competing machines were launched into the U.S. market by rivals Nintendo Co. Ltd. and Microsoft Corp. and the entire sector was put more into the media and sales spotlight.
The weakening Japanese yen also helped the company because sales in the U.S. were worth more in yen as the exchange rate moved. Sony said the average rate during the third quarter of the fiscal year was ¥122.6 per U.S. dollar (A$1.59) against ¥109.2 (A$1.41) in the same period a year earlier.
Consolidated net income during the three months was ¥64.0 billion, a drop of 14.4 percent on the same period a year earlier, and pretax income fell 12.4 percent to ¥119.3 billion, however, reflecting the weaker yen and higher U.S. sales, sales and operating revenues rose 7.4 percent to hit a company record ¥2.3 trillion during the period. With the effects of the exchange rate change taken out, sales would have declined around 1 percent compared to the year-ago period.
Sony reports its results according to U.S. generally accepted accounting practices (GAAP).
The strong performance of the games business was difficult to ignore. It rebounded from an operating loss recorded a year ago to a profit of ¥66.4 billion -- almost equal to that of the company's electronics business -- and accounted for 40 percent of the total operating profit recorded during the period. Sales in the sector rose 62.9 percent to ¥383.2 billion.
Away from the star game and consumer audio/video and IT sectors, the company's performance reflected the general economic conditions with electronics sector sales falling 2.8 percent and operating income sinking 47.0 percent on the year-ago period as Sony found weak demand for its semiconductor and PC OEM (original equipment manufacturer) products.
Geographically, Sony saw sales in the U.S. rise 19.9 percent during the quarter to ¥783.2 billion, equivalent to just over a third of all sales worldwide. Sales in Japan fell 6.4 percent and those in Europe rose 15.8 percent.
Thanks in part to the surging sales of computer game and consumer audio/video and IT products in the U.S. and the yen's depreciation, which is expected to continue to average 130 yen per dollar during the fourth quarter, the company cautiously raised its projections for full year sales and operating revenue and operating income although it kept other forecasts unchanged. And despite the higher estimates, it doesn't mean that things are back to normal at Sony. The new estimates are still well below those made in April 2001 as the current fiscal year was just beginning (see table).
The company's revised outlook for full-year sales and operating revenue is ¥7.55 trillion. The new figure compares to an estimate of ¥7.50 trillion made in September last year and ¥8.0 trillion made in April. Operating income is now forecast to be ¥130 billion, an increase from the September forecast of ¥120 billion but less than half that of the original ¥300 billion estimate.
Sony Corp. Fiscal Year 2002 Consolidated Earnings Estimates made over the last 12 monthsSource: Sony Corp., all figures in billions on yen Apr. 27, 2001, original estimate July 26, 2001, revision Sept. 28, 2001, revision Jan. 25, 2002, revisionSales and operating revenue 8,000 7,700 7,500 7,550Operating income 300 250 120 130Pretax income 280 200 70 70Net income 150 90 10 10.