Sony profits slashed by PS3 losses

Sony profits slashed by PS3 losses

Sony posted its financial results for the fiscal year ended March 31, 2007, and it appears that the analyst predictions weren't that far off the mark. According to a report from Gamepro, a median estimate taken from a survey of 11 analysts forecasted that Sony had lost approximately US$2.04 billion in operating income within their video games division alone, due to the high costs and setbacks associated with the worldwide launch of its PlayStation 3 console. The genuine figure turned out to be $1.97 billion, although sales and operating revenue for the games division increased to $8.61 billion, a 6.1 percent year-over-year increase.

According to Sony's report, overall hardware sales for the division increased due to the addition of the PS3 to the PlayStation brand, but the number of PS2 and PSP units sold decreased from the previous fiscal year. In addition, price drops for the PS2 also managed to cut into potential revenue, although cost reductions in PSP manufacturing managed to alleviate some of the losses.

Sony's other ventures remained profitable enough to pick up the slack from the games division, thanks to a 16.9 percent increase in sales of its electronics products and a 29.5 percent rise in sales related to its movie division. All of Sony's remaining divisions made improvements across the board, except for two: financial services and Sony BMG Music Entertainment.

However, the combined success of all of Sony's other divisions certainly weren't enough to show year-over-year improvement. Although total fiscal year sales for the entire company increased 10.5 percent to $70.30 billion, operating income took a free fall to only $608 million, a 68.3 percent drop from the previous fiscal year.

Despite these bad tidings, the company paints a rosy picture for the coming year, as it expects to make back the initial investment on the PS3. Sony forecasts sales and operating revenue to total $72.72 billion by the end of March next year, which would represent a six percent increase. As for operating income, Sony expects to bounce back from its dismal performance this year and generate $3.64 billion, a whopping 513 percent increase.

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