Sony looks for profits elsewhere to offset PS3
Mon Oct 30, 2006 4:11am ET15
BEIJING, Oct 30 (Reuters) - Sony Corp. (6758.T: Quote, NEWS, Research) said on Monday that it is looking for profits in movies and consumer electronics to offset the impact from price cuts and tough competition for its PlayStation 3 (PS3) game console. However, the world's second largest consumer electronics maker said it still planned to achieve profit margins of 5 percent next year.
"We promised the margins for next year will be 5 percent and we have every intention of doing that," Howard Stringer, chairman and chief executive, told reporters.
"Considering some of the additional costs of PlayStation 3," he said. "We have to generate some excitement and profits from elsewhere in the company to offset the performance of PlayStation 3."
The executive said Sony's movie unit was very strong this year and that consumer electronics as a whole was also a bright spot.
However, Sony expects losses at its game unit to nearly double from its initial estimate to 200 billion yen ($1.71 billion) for the year to March after it cut the price of a PS3 with a 20-gigabyte hard disk drive by 20 percent in Japan.
The bad news for the company continued last week when it posted an operating loss of 20.83 billion yen for July-September due to the mounting cost of recalling millions of computer batteries, in sharp contrast to a profit surge at rival Nintendo Co. (7974.OS: Quote, NEWS, Research) thanks to its DS handheld game machine.
However, Stringer said he was confident the performance for PS3 would be better in its second year when sales of higher margin software begin to increase.
"I think the idea of worrying about a delay in PlayStation is slightly strange to me. Every complex technology runs the risk of delays," said the executive.
"The point really is that PlayStation 3 is already finished and has been tested in America and has been deemed a creative success. In the end that is what counts."
Sony plans to launch the PS3 in November in Japan and North America, setting the stage for a three-way showdown with Nintendo's (7974.OS: Quote, NEWS, Research) forthcoming Wii and Microsoft Corp.'s (MSFT.O: Quote, Profile, Research) Xbox 360 in the nearly $30 billion video game market.
