Sony punished for profit slump

Slow games sales have hit Sony hard

Shares in Sony have crashed almost 12% to two-year lows the day after the Japanese consumer electronics giant reported heavy losses for the past quarter of its business year.

The share price fall, in heavy trading in Tokyo, wiped more than $6bn off the company's market value.

Analysts were mostly pessimistic about the stock's outlook, saying no sustained improvement could be expected until at least early next year, when the results of the October-December sales season should become clear.

On Thursday, Sony had posted a first-quarter net loss of 30.1bn yen (£171m; $244m) after flagging consumer spending saw its key games unit fail to match expectations.

Operating profit was down more than 90%.

The shares finished Friday at 6,260 yen, down 11.5%.

Phone recall

A huge recall of Sony phones by Japan's biggest mobile network, NTT DoCoMo was also responsible for the loss in the April-June quarter, which compared with a loss of 92.4bn yen, after a US accounting charge, in the same period the year before.

In common with many other electronics companies, Sony saw its stockpile of unsold products mount during the quarter, as the global economic slowdown eats into demand.

Things are likely to get worse before they get better, the company said, "due to such factors as decreases in demand, oversupply and falling prices".

Games problems

Although the company showed a slight operating profit of 3bn yen, that does not take into account the cost of writedowns of inventory and the cost of the phone recall.

Before the figures were released brokers were predicting an operating profit of about 26-37bn yen, on a par with last year's.

Looking forward, the company warned that full year net profits would now probably be 90bn yen, rather than the 150bn yen it predicted in April.

The main disappointment, analysts said, was the performance of the games unit, which narrowed losses but still failed to make it into the black.

Sony's PlayStation 2 games console was launched late last year to huge acclaim, but the start-up costs and marketing expenses are continuing to eat into the unit's performance.

Worse, analysts said, was the fact that games sales were being hit hard by the consumer slump.

Overall sales grew just 4.6% to 1.64 trillion yen for the quarter.