Spider-Man fuels Sony profits higher

Spider-Man's record-breaking run at the box office is an unexpected but welcome source of extra revenue for Sony

From Kristie Lu Stout
CNN Tech Correspondent

HONG KONG, China (CNN) -- Sony's blockbuster Spider-Man movie fuelled a sharp rise in operating profit for the June quarter to 51.87 billion yen ($444.4 million).

The company announced on Thursday that earnings were significantly better than the 10 billion yen profit analysts expected.

But they hadn't counted on the success of Spider-Man, which pulled in $675 million in worldwide box offices since its release in May.

Earlier this month, the company announced that it was expecting to post an operating profit for the first quarter, reversing an earlier call of red ink.

At the same time, the world's largest consumer electronics maker said that it expected group operating profit to double to $2.4 billion.

'Year of uncertainty'

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However, Sony chief Nobuyuki Idei has called 2002 "a year of uncertainty," and his comments are being borne out by market conditions.

The company did revise down its full-year sales target to 7.7 trillion yen ($66 billion) from eight trillion, but did not change its profits forecast.

The strength of the Japanese yen against the U.S. dollar right now means that not only does it cost more for Sony when they make products at home, but when they export them to sell abroad they get less yen back.

Given that Sony exports up to two-thirds of its products, it's no surprise that the slump in the U.S. economy is expected to have a profound effect on Sony's earnings.

"With the prospects for a U.S. economic slowdown increasing, risks for Japanese exporters are certainly rising," said Yukari Sat, Senior Economist at JP Morgan told Reuters.

Another Japanese electronics firm, Canon, cut profit forecasts by 10 billion yen ($86 million) on Wednesday. Canon's overseas sales account for 70% of total revenue.

Spider-Man, PlayStation

Sony expects profit for the year to hit $2.4 billion, with a significant chunk coming from PlayStation's high profit margins

But Sony had a secret weapon -- Spider-Man.

The superhero's record-breaking success at the box office helped Sony cushion the blows, with analysts estimating that the movie earned more than 20 billion yen ($172 million) in extra operating profit for Sony's movie arm.

Sony's movie division reported an operating profit of 9.3 billion yen for the June quarter.

And then there's PlayStation 2. Sony expects to ship another 20 million units of the game console this year, having shipped 4.59 million in the first quarter.

Although those figures may look impressive, PlayStation 2 still lags behind Sony's consumer electronic goods in terms of units sold.

But the profit margin in the games market is much higher than in consumer electronics. PlayStation is the most profitable product in Sony's history.

And that's how Sony is offsetting losses from market weakness -- by keeping a diversified product portfolio.

The company may be the largest consumer electronics maker in the world, but they also release movies, music and games.

Innovative products

Sony has also traditionally been an innovator in the field.

The company has also often been able to crank out new products that create new categories and inspire people to buy them no matter what the economic condition.

In 1950, the company became the first Japanese firm to product a tape recorder, while in the 1970s the company created the Walkman, a personal tape player that was the first truly mobile entertainment device.

The Walkman's legacy can still be seen today in the company's portable CD and MP3 players, known as the Discman and Network Walkman respectively.

The PlayStation is another breakthrough product for Sony. Last year, revenue from Sony's game division topped that of the company's music and movie department.

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