TOKYO – Sony Corp reported record revenues and a surprise rise in operating profit for its third quarter on Friday as brisk demand for its games and electronics defied fears of a post-September 11 slump.
The world's largest maker of audio-video electronics got a lift from sales of its hit PlayStation 2 console and from a fall in the value of the yen against the dollar, which boosted the value of overseas income converted into the Japanese currency.
"The electronics business continues to be tough, but the game business is solid," Sony chief financial officer Teruhisa Tokunaka told a news conference.
"We also had the benefits of a weaker yen, which allowed us to raise our forecasts."
The company posted a modest 14.4 percent drop in group net profit for the October-December quarter from a year earlier to 64.0 billion yen ($475.1 million), reflecting losses on its foreign exchange hedging programme and at a recently launched cellphone joint venture with Sweden's Ericsson.
But on an operating basis, Sony's profit rose 9.6 percent to 158.6 billion yen ($1.18 billion), surpassing the 110-133 billion yen range of forecasts from analysts surveyed by Reuters.
Sales for the quarter grew 7.4 percent to 2.29 trillion yen, the highest quarterly result ever.
Sony also nudged upward its operating profit and revenue forecasts for the full business year to March 31.
The market smiled on the results, boosting Sony's share price in London by 3.4 percent from the Tokyo close to 6,410 yen. The announcement came after the close of trade in Tokyo.
CHRISTMAS FEARS GROUNDLESS
"The company can thank the weaker yen and healthy sales of game consoles for the October-December numbers and the upward revision in full-year forecasts," said Hajime Yagi, senior fund manager at Meiji Dresdner Asset Management.
"This trend is likely to continue for the January-March period," added Yagi, whose fund oversees 39.4 billion yen in investment trusts.
"Our fears before the Christmas season turned out to be totally groundless," he said.
Sony officials had expected that the September attacks in the United States would spur U.S. consumers to spend more time at home and more money on home entertainment.
While the attacks cast a pall over consumer sentiment in Sony's biggest market, the forecast was borne out. The game division posted an operating profit of 66.4 billion yen for the quarter, compared with a loss of 13.9 billion yen a year ago.
The PlayStation 2 console has finally begun pulling its weight in the Sony group after dragging the game division to six consecutive quarters of losses to cover development and promotion costs for the next-generation machine.
The company cut its PlayStation 2 shipment target for the 2001/02 business year to 18 million consoles from 20 million, reflecting a cautious stance on production late last year and a slow ramp-up in sales to Asian markets. Profitability was bolstered by cost savings and brisk sales of game software.
The electronics division, which comprises 70 percent of Sony's consolidated revenues, also rebounded from an operating loss of 24.9 billion yen in the second quarter.
It posted a third-quarter profit of 70.6 billion yen with help from robust year-end sales of consumer goods such as its Vaio personal computer and Wega television, although it was down 47 percent from a year ago.
Sony usually earns the lion's share of its full-year operating profits in October-December, bolstered by Christmas and year-end gift buying.
For the current quarter, however, Sony forecast the electronics division would post an operating loss of more than 30 billion yen.
The info-tech slump and an inventory build-up have hit Sony's electronic component business.
In cellphones, it was dogged by a series of technical glitches and recalls last spring.
For the year to March, Sony is projecting a consolidated operating profit of 130 billion yen, up from a previous forecast of 120 billion yen but down 42 percent from a year earlier.
The revenue forecast was raised to 7.55 trillion yen -- up three percent from the year before -- from 7.50 trillion yen.
Its net profit forecast was left unchanged at 10 billion yen, a hefty 40 percent drop from a year earlier.
Sony owed much of its good fortune to the weaker yen.
Sony's previous earnings forecasts issued in October assumed exchange rates of 115 yen per dollar and 105 yen per euro for the second half of its business year.
The yen has since taken a drubbing, falling to three-year lows of nearly 135 yen per dollar in the gloom shrouding Japan's debt-burdened financial sector and moribund economy.
Analysts noted, however, that currency hedging and pressure for discounts in overseas markets had kept Sony from reaping the full benefits of recent yen weakness.
Sony said it achieved an average rate of 122.6 yen per dollar and 109.2 yen per euro in the third quarter, and projected rates of 130 yen per dollar and 115 yen per euro in the fourth quarter.