Tough TV market bites into Sony's earnings

Net income drops almost 9 percent in the December quarter as the electronics giant continues to face a highly competitive marketplace for LCD TVs.

Sony's third-quarter results.
Sony's third-quarter results. Sony

Though Sony scored well in the gaming department, higher competition and lower income in the LCD TV area took its toll on fiscal third-quarter earnings.

For the quarter ended December 31, the Japanese electronics giant reported a net profit of 72.3 billion yen ($885 million), a drop of 8.6 percent from the 79.2 billion yen earned in the year-ago quarter. Sales dipped 1.4 percent to 2.206 trillion yen from the prior year's quarter, which Sony attributed primarily to unfavorable exchange rates.

On the plus side, operating income in Sony's Networked Products & Services group jumped by 26.3 billion yen to 45.7 billion yen, though overall revenue was down. Income was boosted by a strong performance from the gaming business, which benefited from price drops on the Sony PlayStation 3 and higher sales of PS3 software.

But operating income fell in most other divisions, most notably in the Consumer, Professional & Devices segment where it sunk by more than 47 percent. Though revenue here actually rose by 4.2 percent thanks to higher LCD TV unit sales and other factors, income took a hit because of a decline in selling prices for those TVs. Heavy competition from other TV makers, including Samsung, Panasonic, and LG, have forced Sony to keep its own prices lower.

A poor performance at the box office, both in theaters and at home, pulled down sales and operating earnings at Sony's Pictures division. Though the quarter was helped by a strong showing of "The Social Network," based on the founding of Facebook, overall box office sales were lackluster compared with the prior year's third quarter. Higher marketing costs and lower sales in the home entertainment business were responsible for a drop in operating income.

Likewise, Sony's Music segment saw its revenue and operating profit both fall, largely due to the ongoing slump in CD sales. One semi-promising spot was Sony Ericsson, the mobile phone maker jointly owned by Sony and Ericsson. Though its latest sales were down, cost cuts and a move toward more Android phones helped it achieve its fourth consecutive quarter of profitability following a string of losses.

Eyeing its entire fiscal year, which ends March 31, Sony now is looking to bring in annual sales of 7.2 trillion yen, 3 percent lower than the 7.4 trillion yen it predicted in October. The company attributed the shift in forecast to lower-than-expected sales for the year in its Consumer, Professional & Devices group.

About the author

Journalist, software trainer, and Web developer Lance Whitney writes columns and reviews for CNET, Computer Shopper, Microsoft TechNet, and other technology sites. His first book, "Windows 8 Five Minutes at a Time," was published by Wiley & Sons in November 2012.

 

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