Playstation woes hit Sony profits

Production glitches have cost Sony dear in its fight against rival games systems

Sony says that delays in production of the Playstation 2, its flagship games console, have hit profits.

The Japanese electronics giant's operating profit fell 11% to 146.47bn yen ($1.24bn; £855m) in the important October-December period, dragged down by poor games division sales.

Microsoft's X-Box is coming

The division posted an operating loss of 13.93bn yen compared with a 57.54bn yen profit a year earlier.

The discouraging results have forced Sony to slash its full-year net profit forecast to five billion yen from a previous 10bn yen.

Group net profit had slipped 23% year-on-year in the quarter.

Strong yen, Aiwa woes

Sony also blamed its revised earnings estimate on currency factors - saying a strong yen had stripped more than 25bn yen from quarterly operating profit - and on financial support it was considering giving to Aiwa, a loss-making consumer electronics subsidiary.

The combination of problems - also including a sharp worldwide downturn from last year in investor sentiment towards tech stocks - has had a severe effect on Sony's share price.

Since the March 2000 launch of the Playstation 2, Sony stock has lost about half of its value.

US shipments halved

The company has also been heavily criticised for failing to meet demand for its new games consoles in key markets.

Production glitches forced Sony to halve planned shipments to the US to 500,000 in 2000 while, at one point, the consoles were reported to be more widely available in sanctions-hit Iraq than the UK.

Estimated Playstation 2 shipments for the current business year have been lowered to nine million from ten million.

Sony says it has now overcome its production problems but analysts say the company might struggle to recover lost ground from rivals.

High-profile X-Box

Later this year, Nintendo is due to launch its new games console, while software giant Microsoft is poised to make a high-profile entry to the market with its X-Box.

But, in one possible piece of good news for Sony, Sega - maker of the Dreamcast games system - indicated earlier this week that it might back out of console production.

Sony chief financial officer Teruhisa Tokunaka said that while losses at the games unit would grow in the current quarter they would bottom out before March.

"The game unit will generate profits by the middle of the next business year," he added.