Sony net profit drops 86 percent

Sony hopes to ship two million PlayStation 2 units this fiscal year

By Staff and wire reports

TOKYO, Japan -- Sony Corp. on Friday said its net annual profit dropped 86 percent for the year ended March 31.

The company missed its own increased earnings target. But it scored its first annual group operating profit rise in three years.

Sony said sales of Vaio personal computers and other electronic goods were brisk. It predicts further gains as PlayStation 2 gears up.

The said group operating profit, excluding one-off items, edged up about 1 percent to $1.8 billion (225.35 billion yen).

That was below its own 2000/01 estimate of 260 billion yen, which it raised in January and analysts had concurred with.

Its stock traded up 1 percent ahead of the announcement, which came after the close of trading in Japan.

Net profit down from accounting charges

Net profit tumbled 86.3 percent to $135.2 million (16.75 billion yen), reflecting accounting changes that hit its movie division.

The company predicted the net figure would bounce back to 150 billion yen in for the fiscal year through 2002.

Last year's profits were also hit by an operating loss in the game division, traditionally a key profit engine, as Sony struggled with labor pains in rolling out its new PlayStation 2 console. A graphics chip glitch delayed shipments.

The game sector posted a 51.1 billion yen operating loss in 2000/01.

Sony reiterated its target to ship 20 million PlayStation 2 consoles this fiscal year, more than double last year's 9.2 million, and to restore the game sector to profitability.

Operating profit for the business year just started on April 1 was targeted at 300 billion yen, up one-third. It forecast revenue growth of nine percent to eight trillion yen.

Stock up 15 percent this year

The market has boosted Sony's shares more than 15 percent since the start of the year. That compares with an anaemic 2.5 percent rise in the benchmark Nikkei share average.

Its stock ended Friday up 1.0 percent at 9,240 yen.

Strength in the electronics sector, including Vaio PCs and Cybershot digital cameras, combined with yen weakness to offset the game division's woes last year.

Operating profits more than doubled in the electronics division in 2000/01.

A sudden slowdown late last autumn in the U.S. market, where revenue growth dropped nearly to zero in the January-March quarter, threw Sony's profit outlook into doubt and sent inventories surging.

The division managed to trim inventories to 782 billion yen by March 31, down sharply from 903.7 billion yen at the end of December.

That's near Sony's target of 750 billion yen, and equivalent to about 1.75 months of shipments. Sony aims for a further cut to 1.3 months over the next year.

Reuters contributed to this report.

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