Sony Corp will probably report a loss in the fourth quarter because of lower prices for electronic products and slower-than-planned progress in cutting inventories, analysts said.
Sony may post a group net loss Friday of ?940 million (US$7.68 million) in the quarter ended March 31, compared with a loss of ?36.7 billion in the year-ago period, according to a survey of seven analysts by Bloomberg News. While Sony doesn't disclose quarterly profit estimates, subtracting reported income for the first three quarters from its full-year forecast shows it expects net income of ?1.2 billion in the period.
In the first three quarters, profit from Sony's electronics business offset losses on game operations stemming from the cost to develop the PlayStation 2 video-game console. This time profit in the electronics division isn't likely to be enough to offset losses on the game business because of declining demand for personal computers and cellular phones.
Sony's electronics division was the only one to generate operating profit of more than ?16 billion in the nine months to December. The division earned ?264 billion, equal to 110 percent of Sony's total operating profit in the same period.
Sony's fourth-quarter earnings last year were marred by losses in both electronics and game operations, which were equal to 112 percent of Sony's total operating loss in the three months.
The company blamed the losses on yen appreciation against the dollar and development costs of the PlayStation 2 game console.
Sales probably rose 10 percent to ?1.82 trillion for the fourth quarter, according to the analyst survey. That's in line with Sony's indicated projection of ?1.83 trillion. Sales were buoyed by a weaker yen because more than 70 percent of the company's electronic products are sold overseas.
Yet Sony's profit will probably fall short of its projection because profit margins declined for products such as displays, compact disk drives and digital still cameras, analysts said.
Falling demand for personal computers from January to March in the US and slowing demand for cellular phones worldwide forced Sony to cut prices of products such as cellular phone components and computer peripherals, analysts said.
"Price declines of electronic products affected Sony's earnings more than the weak yen did," said Kazuya Yamamoto, an analyst with Mizuho Securities Co. "Sony planned to cut its electronics inventory by ?200 billion, but I do not think the cut progressed as Sony planned." Sony's PlayStation 2 operations lost money in the three months ended in March.
While the loss has narrowed since a year ago, profit from sales of the game machine and related software has not yet covered the development and production costs of the successor to its best-selling PlayStation console.
Game operations posted an operating loss of ?32.8 billion through the nine months to December, while the company had ?241.9 billion in total operating profit in the same period. Sony's game division, which accounted for 40 percent of total sales in 1999, is not the cash cow it once was, with sales accounting for only 8.6 percent of the total in the nine months to December.
Sony has sold more than 10 million PlayStation 2 consoles since their debut in March last year.
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