Sony's annual game sales slide 18.3 percent

TOKYO--Today, Sony announced its earning results for its 2004 fiscal year, which ended March 31, 2004. In particular, Sony Computer Entertainment (SCE), Sony's game division, reported 780.2 billion yen ($6.47 billion) in sales, a decrease of 18.3 percent over the previous year.

In the software department, SCE sold 222 million PlayStation 2 game units worldwide, 17 percent more than in FY2003. America comprised about half of SCE’s total sales with 102 million copies, while Japan accounted for 41 million copies, and Europe represented a figure of 79 million copies.

PS2 games sales rose across the globe, particularly in Europe, which saw a 31 percent increase. Conversely, sales of original PlayStation games shrank worldwide, falling some 48 percent. While SCE shipped 61 million PS games in FY2003, that figure dropped to 32 million for FY2004.

Sony's hardware numbers were also off. PS2 console sales fell by 11 percent to 20.1 million units, down from 22.52 million units in FY2003. While PS2 sales in Japan rose by 40 percent (up 1.23 million units) due to aggressive marketing and price cuts, American PS2 sales dropped a hefty 37 percent, or 4.3 million units.

As for the original PlayStation, worldwide unit sales fell by 51 percent, with only 3.31 million units sold, versus 6.78 million the previous year. SCE's operating profits also took a dip, ending 40 percent lower at 67.7 billion yen ($620 million). Sony attributes the decline to lagging consoles sales and research and development costs.

For its fiscal year 2005, SCE estimates that its software earnings will hold steady, while its hardware sales will continue to decline. SCE forecasts that PS2 sales will fall by 30 percent, while the PlayStation will ship only a third of the units it did during FY2004.

Overall, profits for SCE in FY2005 are expected to be lower than FY2004, mainly due to investment toward next-generation computer entertainment systems. Investment costs for SCE will be shared with Sony's electronics sector, with 190 billion yen ($1.75 billion) allocated to the production of microchips. Of the 190 billion yen, 120 billion ($1.1 billion) will be invested toward the Cell processor, which Sony's next-generation home console is expected to adopt. Sony also plans on shipping 3 million units of its upcoming portable device, the PSP, which goes on sale later this year in Japan and early next year in North America.

Overall, Sony Corp. reported 88.5 billion yen ($810 million) in net income from its entire group of companies, which is 23 percent lower than the previous year. While Sony's 7.496 trillion yen ($68.5 billion) in sales were up a scant 0.3 percent from FY2003, its operating profit fell 46.7 percent to 98.9 billion yen ($904 million). Sony attributes most of its operating profit losses to costs associated with corporate restructuring, including worker layoffs, which cost the company 168.1 billion yen ($1.54 billion) during FY2004.

While Sony estimates that it will continue to spend about 130 billion yen ($1.3 billion) on corporate restructuring in FY2004, the company expects a 62 percent rise in operating profits, to 160 billion yen ($1.46 billion), and a 13 percent increase in net income, at 100 billion yen ($910 million). The company predicted annual sales would stay about the same, with a 1 percent rise to 7.55 trillion yen ($75.5 billion).

Sony's stock price was relatively unaffected by its earnings reports, since its results were about the same as those the company had previously forecast. On Tokyo's Nikkei stock exchange, Sony shares ended the day at 4,610 yen ($42), which represents a 1.28 percent drop (60 yen) from the day before.