Sony is cutting prices on electronics to stay competitive as rivals slash prices to reduce inventories. The company in June reduced the price of its PlayStation2 game console to ?35,000, a pre-emptive step ahead of the release later this year of competing game consoles from Microsoft Corp and Nintendo Co.
"When the entire market is in negative growth, Sony will lose no matter how much it boosts its market share," said Masahiro Ono, an analyst with UBS Warburg Japan Ltd, who downgraded his recommendation on Sony to "hold" this month from "buy." The company's electronics division reported an operating profit of ?248.6 billion in the year ended in March, compared with the company's total operating profit of ?225.3 billion in the year.
Global PC sales in the quarter ended June 30 fell 1.9 percent from the same period a year earlier, the first decline since 1986, when Apple Computer Inc and International Business Machines Corp were creating the industry, market research company Dataquest Inc said last week.
In Japan, production of consumer electronics such as color televisions, stereos and video cameras, slumped 5.8 percent in May in yen terms from a year ago, according to Japan's Electronics and Information Industries Association.
Total production of consumer electronics in Japan in the five months to May fell 7 percent from the same period a year earlier, the association said.
For the first quarter, analysts expect that Sony probably returned to profit on a group net income basis because of an absence of one-time charges, masking a drop in profit at its main businesses.
Group net income probably totaled ?15.2 billion in the period ended June 30, compared with an ?88.3 billion loss a year ago when US accounting changes required that film advertising costs be written off quickly, the eight analysts surveyed by Bloomberg News said.
Investors may also be watching Sony's first-quarter report to see whether the company cuts earnings expectations for the year.
Sony in April said it expects full-year group net income this year of ?150 billion.
The company, whose game division has lost money for five straight quarters because of start-up costs associated with the PlayStation2 and flagging software sales, also expects its video-game operations to get back on track.
Sony expects its game unit to return to profitability in about September.
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