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Sony in the red despite record-high sales

Posted: 18 May 2007 ?? ?Print Version ?Bookmark and Share

Keywords:Sony Playstation? PS3 sales?

Sony Corp. reported May 16 that it achieved record-high sales of $68.6 billion for the fiscal year ending in March, mainly thanks to its electronics segment. But the media focused its attention on the losses sustained by the company's game business.

While Sony reported that its game business was up by 6 percent in its last fiscal year, at $8.8 billion, it also reported that the business suffered a whopping $1.9 billion operating loss.

Sony reported that it produced and shipped 5.5 million PS3 units in the last fiscal year. That number was 500,000 units shy of the 6 million units it originally planned to ship.

Slow PS3 uptake
Moreover, out of the total units shipped, only 3.6 million were actually sold, Nobuyuki Oneda, executive VP and CFO of Sony, disclosed at the announcement of the business results. The company counts the difference as inventory, valued by Sony at $1.6 billion.

Sony predicted that during this fiscal year it would ship 11 million PS3 units, 9 million Playstation portable systems and 10 million Playstation 2s.

Sales of Sony's game titles have been decreasing since their peak in 2004. In the last fiscal year the company sold 26,030 packages. That number is expected to decrease to 25,000 this fiscal year.

"The red ink will continue this fiscal year. We want to move the business into the black next fiscal year," said Oneda. To achieve a competitive position in the marketplace, Sony sold the PS3 for less than its actual cost. "It may be difficult to get rid of the negative margin in this fiscal year," he said, suggesting that cost savings for PS3 have not been as quick as expected.

Sony's Playstation and Playstation 2 made big profits within a few years of their introduction. The profit was mainly derived from the money the company saved on components, largely due to semiconductor process shrinks.

Record sales for chips
Sales of Sony semiconductors jumped by 59 percent to $6.4 billion during the last fiscal year compared with fiscal 2005. The increase was largely due to the internal sales of PS3 chips.

"About 30 percent of our semiconductors are sold to outside customers," said Oneda. "The rest are internal sales and most of them are PS3-related semiconductors."

With the forecasted shipment of 11 million PS3 units this fiscal year, Sony expects that sales in its semiconductor segment will grow by 8 percent to $6.9 billion this fiscal year.

The company plans to invest about $1.1 billion in semiconductors during this fiscal year, down $0.16 billion from the previous year. "The investment in the 65nm process line for PS3 was the peak last fiscal year," said Oneda. "As our investment in the game console has been settled for the time being, the weight of our investment will shift to other devices such as CMOS sensors," said Oneda.

- Yoshiko Hara
EE Times

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