Sony slashes annual profit forecast by 38 percent
Recall of nearly 10 million laptop batteries and PS3 price cut contribute to dismal forecast; slowing PSP, PS2 sales and manufacturing-cost overruns plague recent quarter.
Today, Sony Corporation revised its earnings forecast for the 2006 financial year ending March 31, 2007. In a statement released in Japan, the consumer electronics giant said it now expects a group net profit of 80 billion yen ($674 million) 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.
Sony also lowered its operating profit forecast just over 62 percent to 50 billion yen ($423 million) for the year. Left unchanged for the fiscal year is sales predications, which remain at 8.23 trillion yen ($69 billion).
For the quarter ending September, 30, 2006, profits at the company were off a dramatic 93 percent due to two big factors. Foremost was the recall of 9.6 million faulty lithium-ion laptop batteries, which will cost the company approximately 51 billion yen ($429 million). It also called out higher-than-expected PS3 hardware manufacturing costs and cooling PSP and PS2 sales as major contributors.
Looking ahead, Sony said its recently announced a price cut of the 20GB PS3 in Japan--where it will now cost just 49, 980 yen (approximately $423)--will slow revenues. "A decrease in sales and an increase in operating loss are expected within the game segment as a result of the reduction of the retail price of the PS3 hardware in Japan and the fact that sales and profitability from the PSP business are expected to be lower than originally forecast," the company said in a statement.
Sony added that although the PS3 would be sold at a loss during the initial launch phase, it is "looking forward to the successful worldwide deployment and expansion of the platform" in the long term.
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