Sony income up, but PS3 R&D guts game division

Sony Corporation called a press conference today in Tokyo to announce its consolidated results for the financial year ending March 31, 2006. Though the company's operational results were strong, an increased tax rate resulted in a year-on-year decrease in net income.

Sony's sales and operating revenue of 7.5 trillion yen ($63.9 billion) grew by 4 percent, while operating income of 191 billion yen ($1.6 billion) beat the previous year by 68 percent, turning heads on Japan's Nikkei stock exchange. However, an increased tax rate on the company's deferred tax assets led to a weaker bottom line than those numbers would suggest: Net income for the year came to 123.6 billion yen ($1.06 billion), a 24.5 percent decrease from the preceding year.

On the gaming side of the business, Sony's game division showed strong revenue performance but lackluster profitability, with 958.6 billion yen ($8.2 billion) in revenue yielding only 8.7 billion yen ($75 million) in income. Despite revenue growth of 31 percent, profits for the division fell 80 percent year-on-year, a sharp decline that Sony attributed to continued high R&D costs for the PlayStation 3 and "charges associated with preparation for the launch of the PS3." As a result, the game business was a drag on the company's overall profitability this year; despite bringing in about 13 percent of overall revenue, games yielded only 7 percent of the company's profits.

Sony reports that PS2 sales held steady over the last year--an impressive achievement given how long the console has been on the market. The company shipped 16.2 million PS2s during the financial year, as well as 14 million PSPs. The introduction of the PSP has been a boon for the bottom line; much of the gaming division's growth over the last year was due to sales of PSP hardware and software.

Other bright spots for the company included its life insurance business and LCD TVs, where the Sony/Samsung joint venture has gained market share at archrival Sharp's expense.