Sony reports strong earnings but unplugs Aibo

Sony reported strong earnings for the three months from October to December 2005.

Sony reported some of its strongest quarterly earnings in several years on Thursday and upgraded its forecast for the full year. Both sales and net profits jumped to all-time highs, helped by good news from product sectors that had been problematic.

In a continuation of its cost-cutting efforts, however, Sony also said that it would discontinue several more products including its Aibo robot.

Ten months after a major management reshuffle that saw Howard Stringer appointed chairman and chief executive officer (CEO), the company reported sales and operating revenue of YEN 2.4 trillion ($AU26.57 billion as of the last day of the period being reported) for the three months to December, up 10 percent from a year earlier. Net income was YEN 168.9 billion, up 18 percent.

Sony's key electronics business saw improvements on the back of brisk sales of its Bravia LCD (liquid crystal display) televisions, which achieved number-one market share in the U.S., according to Nobuyuki Oneda, Sony's chief financial officer, speaking at a Tokyo news conference. Sony was late to the LCD TV market and its products had been performing poorly until the launch of the Bravia line.

Electronics sales were up 4.7 percent to YEN 1.6 trillion and operating profit increased 56.2 percent to YEN 78.9 billion. Sales fell in Japan and Europe but climbed in the U.S. and the rest of the world.

Sales of DVD- and high-definition camcorders were also healthy, and Sony sold more digital music players in all regions, it said. However, sales of CRT (cathode ray tube) televisions fell as consumers showed a preference for flat-panel models, the company said.

"In the electronics business there were signs of recovery but it's not yet at a satisfactory level," said Oneda.

Continuing the restructuring in its electronics business, the company said it would end its Aibo robot line, stop development of its Qrio robot, stop development and manufacturing of PDP (plasma display panel) televisions, and stop selling in-car entertainment products in Japan. It will also kill its Qualia line of pricey, high-specification products.

In the gaming sector, strong demand for Sony's PlayStation Portable (PSP) helped lift overall sales for the division by 48 percent to YEN 419.2 billion, and operating income by 52 percent to YEN 67.8 billion. The company shipped 6.2 million PSPs during the quarter, up 5.7 million from a year earlier, and 5.4 million PlayStation 2s, 2 million less than the same quarter a year earlier.

Sony's pictures division recorded a small loss on flat sales after the lack of a hit movie in the quarter. It's financial services sector reported a 31 percent increase in revenue and a 238 percent increase in operating income, thanks in part to higher returns on investments.

The results had been eagerly awaited by Sony watchers for signs that the corporate-wide restructuring is paying off. The plan, which was outlined in September, is on track, Oneda said.

By the end of 2005, Sony had achieved cost reductions of YEN 15 billion out of its target of YEN 200 billion, which it hopes to reach by the end of March 2008. Its total staff count has been reduced by 2,400 against a target of 10,000, and 3 manufacturing plants have been closed or sold against the target of 11 by the 2008 deadline.

For the full year, Sony said it now expects sales to be YEN 7.4 trillion, 2 percent above its previous forecast, and net income to be YEN 70 billion. Sony had previously said it expected to lose YEN 10 billion [b] during the full year.

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Martyn Williams

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