Sony's Profit Plunges 90%

High yen and intense price competition to blame

Hit by a surging yen, a weak global economy and intense price competition,Sony Corp. said on Oct. 29 its operating profit plunged 90% in the second quarter of the financial year. Operating profit dropped to 11 billion yen (US$113 million) in the three months through September, down from 111.6 billion in the same period of the previous year.

In the second quarter, net profit plunged 72% to 20.8 billion yen as revenue dropped 0.5% to 2.07 trillion yen.

The steep fall was partly due to a slump in the Japanese stock market, which hit Sony's financial services business.

The yen soared this month to a 13-year high against the dollar due to the global market crisis, causing headaches for Japanese exporters whose products become less competitive overseas.

Sony said it has cut its sales target for liquid crystal display televisions to 16 million units this financial year from a previous 17 million due to tough competition. "The decline in prices (of televisions) is now steeper particularly in the U.S. and Europe," said Sony's chief financial officer, Nobuyuki Oneda. "Considering foreign exchange and other issues, we cannot avoid suffering a considerable loss," he said, adding it would be hard to return to the black in the television business over the next few years.

But in the video game sector, losses more than halved to 39.5 billion yen thanks to a recovery in sales of Playstation3 and Playstation Portable, which have faced tough competition from rival Nintendo's Wii and DS consoles. Its entertainment business was on positive turf, as sales at Sony Pictures Entertainment rose 3.4% .

Sony's financial business, ranging from insurance to banking, incurred a loss of 25.3 billion yen, reversing a profit of 23.1 billion yen a year earlier due to a plunge in Japanese share prices.

Troubles at the company's joint venture Sony Ericsson have added to the woes. The mobile telephone maker plunged deep into the red in the quarter with a net loss of 18 million euros (US$22.8 million).

Copyright Agence France-Presse, 2008

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