Sony Loss Doubles On PlayStation2 Launch Costs

April 28, 2000

Sony, the maker of the PlayStation video game box, said its loss in the first quarter almost doubled, as earnings at its game division slipped because of start-up costs to develop and market a more advanced version of the best-selling game console.Group net loss at the world's second-largest electronic appliance maker in the three months to March 31 widened to 36.7 billion yen ($342.18 million), or 81.6 yen (76 cents) a share, from 19.4 billion yen ($180.87 million), or 47.2 yen (44 cents), in the year-ago period. The results were slightly better than the average forecast of four analysts surveyed by Bloomberg News. Sales rose to 1.65 trillion yen ($15.38 billion) from 1.48 trillion yen ($13.8 billion).Sony is being challenged by rivals such as Microsoft, which is set to threaten its dominance of the video game console market, and a stronger yen, which depresses revenue earned abroad. Still, Sony is benefiting from a surge in demand worldwide for products such as digital camcorders, portable music players and digital cameras.""It's a healthy loss,"" said Hiroyuki Ono, an analyst at e-Research Japan, an independent research institute focusing on information and technology businesses ""This points to larger sales for the console.""For the year, Sony said profit fell a lower-than-expected 32 percent. Net income in the year to March 31 fell to 121.8 billion yen ($1.14.billion), or 289 yen ($2.69) a share, from 179 billion yen ($1.67 billion), or 437 yen ($4.07), in the year-ago period. Sales fell 1.7 percent to 6.6 trillion yen ($61.52 billion) from 6.8 trillion yen ($63.38 billion).Sony shares fell 70 yen (65 cents), or 0.6 percent, to 12,410 yen ($115.69). The results were released after the close of trading.Games Sony's game unit, a primary engine of earnings growth the past two years, marked a loss for the first time in nine quarters. Operating loss for the quarter was 25.8 billion yen ($240.47 million), compared with an operating profit of 4.3 billion yen ($40.1 million) in the year-earlier period. Annual operating income at the division fell 43.3 percent.Sony said worldwide shipments of PlayStation hardware were 18.5 million units for the year, compared with 21.6 million units in the year-ago period. The company said it shipped 1.41 million PlayStation2 units for the year.Software shipments, including Sony titles and those developed under Sony licenses, rose slightly to 200 million units for the year from 194 million units. Software shipments for the PlayStation2 game console, including such titles as ""Gran Turismo 2"" and ""Minna-no-Golf 2,"" totaled 2.9 million units, or two titles for every PlayStation2 game console sold.Sony introduced the successor to its popular PlayStation game on March 4. PlayStation2 went on sale in Japan at 39,800 yen ($371), the same price as the original game console.Annual operating income at Sony's electronics division fell 9.5 percent, the smallest decline among the company's four main divisions.Investors are closely watching earnings at the unit, which in the October-December period posted its first quarter-on-quarter operating profit in a year. Analysts say the division, which contributes about 63 percent of sales and 47 percent of operating income, suffered in 1998 and 1999 from stagnant offshore sales, severe price competition from rivals, and the yen's appreciation.Source: Bloomberg News