Sony posture mimics Japan economic woes

A rising yen and poor Japanese economy whacked Sony Corp.’s bottom line in the fiscal third quarter, as net income slid 38.1% to $ 150 million, or 37 cents per share, on a 3.7% dip in revenue to $ 9.53 billion.

The media and electronics titan also said Thursday it revised its earnings forecast for the year ending March 31. It now expects profits to drop 45% compared with a prior prediction of a 17% decline, mostly due to “disappointing” U.S. box office receipts.

Sony shares traded here lost $ 1.13 to $ 55.25, amid that prediction, a bearish Tokyo session Thursday and roiling currency concerns.

At Sony Pictures Group, disappointing holiday B.O. — feltthroughout the industry — pared third-quarter sales and revenues by 13.2% to $ 769.5 million despite successes like Columbia’s “In the Line of Fire” and TriStar’s “Cliffhanger” and “Sleepless in Seattle.” On a dollar basis, U.S. sales fell 11 %.

Sony’s Music Group fared better, as quarterly sales and operating revenue gained 9.1% to $ 1.36 billion, helped by the success of albums by Pearl Jam, Mariah Carey, Gloria Estefan and Billy Joel. On a dollar basis, U.S. sales added 46%. Total sales and revenues for the Music and Pictures divisions fell 0.2% to $ 2.13 billion.

A Japanese recession of record severity and sluggish European business conditions further eroded Sony’s core electronics business. The advancing yen — converted at 112 yen per dollar for last quarter’s results against 1992’s comparable 125 per dollar — exacerbated the problem.

Helped Sony sales

On a regional basis, the introduction of new audio products helped Sony sales in Japan increase 2.8% last quarter in spite of the dismal environment. The robust yen knocked U.S. sales 0.5% lower, although sales volume actually grew.

Europe witnessed a 18.9% drop in sales, also mostly due to the yen, but a hot Asian market prompted a 6.7% rise in what Sony called “sales in other areas.”

Its own forecast aside, Sony’s outlook for the near future could worsen if the White House toughens its trade stance, analysts said. Industrial and consumer electronics giants such as Sony are considered a primary target if the Clinton Administration institutes trade sanctions against Japan.

Grew 23.7%

Data released Thursday showed the U.S. trade deficit with Japan grew 23.7% to a record $ 59.3 billion last year. Japanese officials said the government was adopting a package of plans to remedy the imbalance, clearly hoping to avert the threat of sanctions.

Many pundits believe the U.S. will not actually launch a trade war against Japan, but merely “talk up” the yen, i.e. hint to currency speculators that it desires a stronger yen/weaker dollar scenario in order to stem the tidal wave of Japanese exports.

Poor perf

Currency market reaction to this policy over the past year figured heavily in Sony’s poor third-quarter performance and will likely continue to pressure Japanese exporter revenues in the absence of a trade pact.

Since Dec. 31, the yen has jumped another 7% to about 104.20 yen per dollar, based on a late New York quote Thursday.

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