Sony Profits Drop on Video Game Woes

Thursday, January 25th 2001, 12:00 am

By: News On 6

TOKYO (AP) â€” Sony Corp.'s profit dropped by 22.8 percent in its third fiscal quarter as lackluster video game sales, a loss at a subsidiary and an accounting adjustment required in the filmed entertainment industry offset strong results from its electronics business.

The huge electronics and entertainment concern slashed in half its estimate of profits for the full fiscal year which ends in March.

Sony said Thursday it earned 72.2 billion yen ($612 million) in the three months ended in December, down from 93.6 billion yen a year ago. Sales rose 10 percent to 2.1 trillion yen ($17.8 billion) from 1.9 trillion yen a year ago.

The company said it now expects to ship only 9 million of its PlayStation2 video game consoles this fiscal year, down from its earlier forecast of 10 million shipments. So far, Sony said 6.4 million PlayStation2 consoles have been sold worldwide, with 2.88 million in the third quarter.

The more pessimistic outlook on shipments was due to the delay of key games such as the ``Gran Turismo 3'' racing game, said Sony executive deputy president Teruhisa Tokunaka.

The lack of game titles has been a major problem for PlayStation2. Tokunaka said more games were expected in the months ahead.

Although PlayStation2 went on sale in the United States during the quarter, dropping software sales hurt the sector, pushing down operating revenue by 2 percent.

A major factor behind the drop in quarterly profits was the new film industry accounting standard that requires advertising and marketing costs to be figured in quickly. That will cost Sony about $250 million or $280 million for the fiscal year ending in March, it said. Under the previous standards, companies could write off the expenses over up to 10 years.

Also hurting results was a loss of 37 billion yen ($314 million), up from the previous forecast of 21 billion yen at Aiwa Co., which is 51 percent owned by Sony.

Sony now expects to post profits of 5 billion yen ($42 million) for the fiscal year ending in March, down from the previous forecast of 10 billion yen partly because of its lagging game business.

Sony's earnings suffered despite robust sales of personal computers, digital cameras and cell phones in Japan and of PCs, color TVs and video cameras in the United States. Sales in the electronics sector nearly tripled for the quarter from a year ago.

``The electronic sector was very good and acted as the driving force,'' Tokunaka told reporters. ``I was a little disappointed by the game business. Overall, we did so-so.''

Tokunaka said he was not optimistic about electronics sales for the next quarter, given the growing inventory in the United States.

In its music business, Sony was hurt by falling CD sales in Japan and other parts of the world, pushing sales down by 17 percent for the quarter. But new releases by Ricky Martin and Sade in the United States helped, Sony said.

Sales at Sony Pictures Entertainment were up nearly 5 percent on the box office success of ``Charlie's Angels'' and ``Vertical Limit.''