Batteries, PS3 push Sony to Q2 operating loss

The global recall and replacement of millions of laptop batteries, and start-up costs for the PlayStation 3 console, pushed Sony’s operations into the red for the July to September quarter, despite a jump in sales

The global recall and replacement of millions of laptop batteries, and start-up costs for the PlayStation 3 console, pushed Sony’s operations into the red for the July-to-September quarter, despite a jump in sales.

The company reported an operating loss of ¥20.8 billion (US$174.5 million) against an operating profit of ¥74.6 billion in the same period last year. The loss includes the estimated ¥51.2 billion that Sony will lose as a result of the laptop battery recall under way.

Sony’s net income, which includes profit and loss from its core operations and subsidiaries, and other extraordinary items, dropped 94.1% to ¥1.7 billion.

However, sales and operating revenue rose 8.3% to ¥1.85 trillion. The digital still camera business enjoyed a particularly strong quarter, with the DSC-T10 model proving popular with consumers. Sony’s mobile phone joint venture with Telefonaktiebolaget LM Ericsson and Sony Ericsson Mobile Communications also enjoyed record sales thanks in part to the popularity of its Walkman and Cybershot phones. In the motion picture sector “Talladega Nights: The Ballad of Ricky Bobby” helped Sony Pictures Entertainment, Sony said.

Sony’s core electronics business saw a 12.1% increase in sales, but operating profit dropped more than 70%, largely because of the battery-replacement costs and a one-time pension fund gain the year earlier. Sony’s LCD TV business saw a healthy rise in sales but the business still lost money in the quarter.

“Excluding these items operating profit in electronics would have increased slightly,” said Nobuyuki Oneda, Sony chief financial officer, at a Tokyo news conference. The largest contributors to profit were digital video cameras, digital still cameras and broadcast and professional equipment, he said.

The games business dropped into the red as a result of start-up costs for the PlayStation 3. Sales also fell because of lackluster demand for the PlayStation Portable (PSP). For the full year Sony cut its shipment estimate for the PSP from 12 million units to 9 million units.

The company’s restructuring plan remains on track and has achieved several of its goals, Oneda said. By the end of September the company had succeeded in achieving cost savings of ¥120 billion against its goal of ¥200 billion by the end of March 2008. Two manufacturing sites remain to be closed and it still needs to discontinue some products, but Sony has laid off 10,100 staff, which is above its target of 10,000 staff.