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Last Updated: Thursday, 23 October, 2003, 06:54 GMT 07:54 UK
Slowing PS2 dents Sony profits
Sony Playstation 2
Sony is gearing up for an overhaul of its electronics arm
Slow sales of the Playstation 2 games console have produced a 25% drop in profits at Japanese electronics giant Sony.

The firm cut its full-year operating profit forecast by almost one-quarter to 100bn yen (542m; $918m), after reporting net earnings of 32.9bn yen for the the third quarter of this year.

While Sony's results appear respectable in isolation, they come at a time when its rivals - notably Japan's Matsushita and Sharp - are performing particularly strongly.

And investors in Sony are nervous about an impending announcement of an overhaul of its electronics business, which suffered a 6.5% sales drop in the year to end-March.

Fears over Sony - which reported results after the Tokyo markets closed - helped spark a 5% drop in the Nikkei share index.

Bad at games

Sony's electronics business has been a relative underperformer in recent years.

Sony shares versus the Nikkei
Feeble sales in many products - most notably games hardware - have weighed on Sony's shares, causing the firm to miss out on a surging Nikkei this year.

Sony's Game division, which produces both hardware and software for games, saw its sales fall to 161bn yen in the third quarter, from 250bn yen a year earlier.

Sony blamed the sharp decline on weak Playstation sales, which were dented by a dock workers' strike in the US, and which compared unfavourably with a very strong quarterly performance in the same period of 2002.

Only in Europe are Playstation 2 unit sales still on the rise, Sony said.

Money worries

Sony is the most closely-watched company in Japan, and its performance is seen as a key indicator of any possible revival in the country's stagnant economy.

Being heavily geared towards exporting, Sony is particularly vulnerable to the strong yen, which has made Japanese firms less competitive on international markets.

Currency effects meant that, although Sony recorded an increase in its overall international sales, revenues in yen terms were flat.

Japanese policy makers are increasingly concerned over the effects of the yen, and have repeatedly intervened to push the currency down - although with little lasting effect.

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28 Apr 03  |  Business

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