PlayStation Network hack will cost Sony $170M

Sony has outlined the effect of recent events on its business ahead of reporting its financial results Thursday

Sony expects the hack of the PlayStation Network and will cost it ¥14 billion (US$170 million) this financial year, it said Monday.

Unknown hackers hit the network gaming service for PlayStation 3 consoles in April, penetrating the system and stealing personal information from the roughly 77 million accounts on the PlayStation Network and sister Qriocity service. A second attack was directed at the Sony Online Entertainment network used for PC gaming.

Sony responded to the attacks by taking the systems offline. It called in several computer security companies to conduct forensic audits and rebuilt its security system.

Users in many countries are being offered a year-long identity-theft protection program and free games. The cost estimate includes those actions and associated legal costs, said Masaru Kato, Sony's CFO, at a Tokyo news conference.

"To date, we have not confirmed any misuse of personal information or credit cards," said Kato.

The costs will be booked in Sony's current financial year, which will end on March 31.

Sony said it made the announcement because it expects to record a net loss of ¥260 billion for the financial year just ended due to charges associated with U.S. GAAP (generally accepted accounting practices) rules.

The March 11 earthquake and tsunami occurred just three weeks before the end of the financial year and didn't have a large impact on the company's global financial performance for the year, but it did push Sony's Japanese operations into a loss.

Those Japanese operations had lost money the previous two years but Sony, anticipating a profit in the year just ended, had recorded tax credits it intended to carry forward. However, GAAP rules say tax credits cannot be recorded for three years in a row, so Sony is recording a non-cash charge for the credits it had taken.

The earthquake hit Sony's domestic operations and led to a sharp fall in consumer demand in Japan in the last weeks of March, but its effect on the results for Sony's electronics business was limited because it occurred so close to the end of the financial year. Sony estimates that resulted in a ¥22 billion drop in sales and ¥17 billion in quake-related costs.

Overall, the company said sales in the previous year were around ¥7.2 trillion.

The company will report an operating profit of around ¥200 billion, but the GAAP-related charge will help push Sony to a net loss of around ¥260 billion. Operating income more closely tracks the company's performance in its core areas and excludes many one-off charges.

Sony will report actual results for the financial year from April 2010 to March 2011 on Thursday.

Martyn Williams covers Japan and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

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Martyn Williams

IDG News Service
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