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Battery recall, video game losses drain Sony profits

They fall 94 percent, to $14-million, from $234-billion in 2005.

By ASSOCIATED PRESS
Published October 27, 2006

TOKYO - A global battery recall and red ink in its video game business decimated Sony's profits in the most recent quarter, the Japanese electronics and entertainment company said Thursday.

Sony Corp.'s group net profit for the July-September quarter fell 94 percent, to 1.7-billion yen ($14-million), from 28.5-billion yen ($240-million) the same period the previous year, the Tokyo-based manufacturer said.

An extra cost of 51-billion yen ($429-million) related to a global recall of 9.6-million Sony laptop batteries was a major factor behind the sharp drop in profit for the fiscal second quarter.

Almost every major laptop maker in the world, including Dell Inc., Apple Computer Inc. and Lenovo, has recalled of Sony lithium-ion batteries that could overheat and burst into flames.

Sony reported a 43.5 billion ($366-million) operating loss in its gaming division because of charges related to the preparation for the next-generation PlayStation 3 console, set to go on sale in the United States and Japan next month.

Sony said last month the machine's launch in Europe will be delayed until March because of mass production problems in a video technology called Blu-ray disk that the machine supports.

The company has also reduced the price in Japan for the PS3 by about 20 percent in an effort to win buyers - a move that's likely to reduce sales revenue because initial shipments are expected to be limited and sell out.

In the core electronics segment, Sony's operating profit for the three months ended Sept. 30 shrank 71 percent compared with a year earlier.

Sony has been trying to turn around its electronics business after getting beaten by rivals on key products such as Apple's iPod and liquid crystal display TVs from Sharp Corp. and Samsung Electronics Co.

The charge for the battery recall hurt earnings in electronics, despite strong sales of Bravia flat-panel TVs and Cyber-shot digital cameras, Sony said. The absence of last year's gain from a pension fund reimbursement in Japan also contributed to the operating profit decline in that sector, it said.

Chief financial officer Nobuyuki Oneda said Sony's liquid crystal display television business, which has been working to reduce losses, is expected to post a profit in the October-December quarter.

Sony's movie business also fared poorly, seeing its operating loss grow to $129-million, partly on flops such as Zoom and All the King's Men, it said. Faring better were Talladega Nights: The Ballad of Ricky Bobby, Monster House and Click.

[Last modified October 27, 2006, 00:31:52]