Sony Q2 profits plummet 94 percent

PS3 delay, battery recall gut-punch electronics-maker's quarterly profits; game division 43.5 billion yen in the red.

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Two weeks after Sony revised its annual profit forecast, the company has reported its income for the quarter ending on September 30, 2006. And, as analysts predicted, the three-month period was not kind to the electronics giant.

Sony's net quarterly profit plunged to just 1.7 billion yen ($14.36 million) for the fiscal second quarter from 28.5 billion yen ($240.8 million) a year earlier. However, overall revenue for the quarter rose 8 percent to 1.85 trillion yen ($15.6 billion) from 1.7 trillion yen ($14.4 billion) a year earlier.

How could Sony's income rise and profits fall at the same time? One major factor was its recall of 9.6 million laptop batteries, which cost the company 51 billion yen ($429 million). Another was its game division, Sony Computer Entertainment, which reported a 43.5 billion yen ($367.5 million) operating loss for the quarter. The shortfall was blamed on declining international sales of the PlayStation 2 and PlayStation Portable during the quarter and sliding PS2 game revenue. During the quarter, the company produced 5.02 million PS2s (an increase of 0.01 million units over July-September 2005) and 3.89 million PSPs (an increase of 0.14 million units over July-September 2005).

Sony also said its profit "deterioration was due to recording of charges associated with preparation of launch of the PlayStation 3 platform and the continued high research and development costs associated with the PS3." The next-gen console is set to launch in Japan and North America next month and in Europe in March 2007, but will be available in much lower quantities than Sony originally envisioned.

Sony now predicts an 80 billion yen ($674 million) net profit for the full fiscal year. That figure is 38 percent below the 130 billion yen ($1.1 billion) net profit it had forecast in July. It expects overall annual revenue to rise 10 percent to 8.23 trillion yen ($69.5 billion).

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