Sony profits hit by falling TV prices, strong yen

Stiff price competition in the flat-screen TV market and the strong Japanese yen hurt profits at Sony in the last three months of 2010, the company said Thursday.

Net profits at the consumer electronics giant dropped 8.6 percent on the same period a year earlier to ¥72.3 billion (US$886 million) as sales fell 1.4 percent to ¥2.2 trillion.

The lower sales came primarily as a result of the strong yen, which has been hitting Sony and other Japanese exporters all year. In the last year, the yen has appreciated 9 percent against the U.S. dollar and 18 percent against the Euro making the price of Sony goods more expensive outside of Japan, and reducing the profit made on each item sold.

Sony's consumer, professional and devices division, which includes its TV business, saw profits plunge 47 percent as the company was forced to cut the price of LCD televisions to match competitors. Ironically, the lower prices helped Sony increase sales of TVs from 5.4 million in the last three months of 2009 to 7.9 million in the same period of 2010.

Sony isn't alone in feeling the effects of falling TV prices. Panasonic, its biggest domestic competitor, said Wednesday that its TV business recorded losses during the quarter on steep price declines. Samsung and LG Electronics, which together with Sony and Panasonic account for more than half of all flat-screen TV sales, were also impacted by lower prices for televisions.

A slowdown in demand for its PlayStation 3 console and PlayStation Portable hit sales at its networked products and services division, which fell 6 percent. Sony shifted 6.3 million PS3s during the quarter, down from 6.5 million during the year-earlier period. PSP sales dropped from 4.2 million units to 3.6 million units.

But the lower sales didn't dent profits. Reductions in the cost of PS3 components meant Sony saw profits at the division surge 135 percent.

Looking ahead, Sony cut its sales forecast for the full financial year, which ends on March 31. Lower-than-expected sales in its consumer division are expected to bring full year sales in at ¥7.2 trillion, which is down 3 percent from its previous forecast but broadly in line with actual sales the year before. Sony kept its profit forecasts unchanged.

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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