PlayStation 3 price cut pulls down Sony profits

Sony reports 5.3 per cent fall in net profit

Sony's core electronics business more than doubled profits in the last quarter of 2006, but failed to offset price cuts to its PlayStation 3 game console, leading to an overall profit decline of just over 5 per cent.

The company said sales and operating revenue increased 9.8 per cent to YEN 2.6 trillion ($US21.4 billion) while net profit fell 5.3 per cent to YEN 159.9 billion.

Sony Computer Entertainment, the division responsible for its PlayStation gaming consoles, was the only one of Sony's main business units that registered a loss in the quarter. It lost YEN 54.2 billion primarily due to the retail price of the more expensive of the two consoles being reduced from a planned YEN 62,790 to YEN 49,980 in Japan. The cut was made, Sony said, due to negative feedback from consumers.

Sony's electronics business saw profits more than double to YEN 177.4 billion on 16.9 per cent higher sales of YEN 1.9 trillion, it said.

The unit had a generally positive quarter with sales of Bravia LCD televisions and Cybershot digital still cameras increasing. Europe saw the biggest per centage sales jump, up 21 per cent, thanks to better LCD TV and Vaio PC sales, while tough competition in the US TV market meant sales there increased by just 3 per cent.

Sony Pictures returned to profitability as sales jumped 47 per cent, but sales in the financial services division fell 9 per cent.

Underlining the generally positive results, Sony revised its full-year profit forecast upward for the year to the end of March. It now expects to record a net profit of YEN 110 billion for the year, up from its previous forecast of YEN 80 billion, although still lower than the YEN 124 billion it reported last year. The sales forecast was left unchanged.

Sony's mid-term business plan has targeted a profit margin of 5 per cent for the coming fiscal year. Sony's electronics business is already meeting its part of the target and will continue to do so next year however the games unit needed to improve, Sony's chief financial officer, Nobuyuki Oneda, said.

He expected to bring the company's games unit closer to break-even in the second half.

Sony would target cost savings in the PlayStation 3 by introducing more advanced chips and consolidating components to reduce the overall number of parts, Oneda said.

The company is already on the way to the first of these targets, with the recent start of production of a new version of the Cell processor built with a 65-nanometer production process. The chip in current consoles is built using a 90-nanometer process and the upcoming switch will mean a chip that is 40 per cent smaller.

Costs would fall in line with the size reduction, Sony said. It did not say when the new chip would appear in consoles.

Sony wouldn't provide any PlayStation 3 shipment estimates for the coming financial year but said it remained confident it would ship 6 million consoles up to March. It also revised upwards its PlayStation 2 shipment forecast from 11 million units to 13 million units. Sony counts shipments as finished consoles leaving its factory for Sony warehouses and distributors.

Oneda ruled out the possibility of further price cuts in the near future, but hinted that this could happen in two or three years' time.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Martyn Williams

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?