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Sony Electronics Earn, Gaming Drags

sony upThe PS3 and Blu Ray may be Sony’s bigger bets but camera’s and consumer electronics are increasingly proving to be their steady hand. When earnings were announced today, it was the strength of camera’s and televisions that carried them. Net profit for September was in at $646.7m. That was largely thanks to strong electronics sales (which account for 2/3rds of annual sales). On the quarter Sony hit their highest earnings results in three quarters. They also adjusted forecasts upwards for the fiscal year (which ends March 2008).

Despite keeping on track for their 5% operating margin goal, however, gaming remains the leading story. The beleaguered game division returned the 7th consecutive losing quarter. And the losses are only getting worse. This quarter was a negative hit of $848m, nearly double the loss for the same quarter last year.

The Wii and Xbox continue to outsell Sony’s newest console by a significant margin. Solid sales of the portable PSP and prior generation PS2, haven’t been enough to make a difference. And so far, price cuts and model changes with the flagship aren’t readily impacting purchasing choices either.

The sales sluggishness makes Sony’s longer term gamble to turn the console into a convergence device that much more of a risk. The holiday sales period is upon them, and becoming increasingly significant. Even with a long term vision, and costs reductions taking effect (Sony recently moved to offload chip production in a deal with Toshiba), the other divisions can’t cover gaming losses indefinitely. Sooner than later something is going to have to change.

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