Batteries, PS3 push Sony to Q2 operating loss

The global recall and replacement of millions of laptop batteries, and start-up costs for the PlayStation 3 console, pushed Sony's operations into the red for the July to September quarter, despite a jump in sales.

The company reported an operating loss of YEN 20.8 billion (AUD$230 million) against an operating profit of YEN 74.6 billion in the same period last year. The loss includes the estimated YEN 51.2 billion that Sony will lose as a result of the laptop battery recall currently under way.

Sony's net income, which includes profit and loss from its core operations and subsidiaries, and other extraordinary items, dropped 94.1 percent to YEN 1.7 billion.

However, sales and operating revenue rose 8.3 percent to YEN 1.85 trillion. The digital still camera business enjoyed a particularly strong quarter, with the DSC-T10 model proving popular with consumers. Sony's mobile phone joint venture with Telefonaktiebolaget LM Ericsson, Sony Ericsson Mobile Communications, also enjoyed record sales thanks in part to the popularity of its Walkman and Cybershot phones. In the motion picture sector the movie "Talladega Nights: The Ballad of Ricky Bobby" helped Sony Pictures Entertainment, Sony said.

Sony's core electronics business saw a 12.1 percent increase in sales but operating profit dropped more than 70 percent, largely due to the battery replacement costs and a one-time pension fund gain the year earlier. Sony's LCD TV business saw a healthy rise in sales but the business still lost money in the quarter.

"Excluding these items operating profit in electronics would have increased slightly," said Nobuyuki Oneda, Sony chief financial officer, at a Tokyo news conference. The largest contributors to profit were digital video cameras, digital still cameras and broadcast and professional equipment, he said.

The games business dropped into the red as a result of start-up costs for the PlayStation 3. Sales also fell due to lackluster demand for the PlayStation Portable (PSP). For the full year Sony cut its shipment estimate for the PSP from 12 million units to 9 million units.

The company's restructuring plan remains on track and has already achieved several of its goals, said Oneda. By the end of September the company had succeeded in achieving cost savings of YEN 120 billion against its goal of YEN 200 billion by the end of March 2008. Two manufacturing sites remain to be closed and it still needs to discontinue some products, but Sony has already laid off 10,100 staff, which is above its target of 10,000 staff.

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Martyn Williams

IDG News Service
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