Yen crunch cramps Sony quarter

Net income slips 15%

NEW YORK — Currency-related woes masked an upbeat quarter at Sony Corp. as a thriving electronics division — by far the company’s biggest business — offset softer numbers in filmed entertainment, music and games.

The Japanese giant said Wednesday that net income for the third quarter (ended in December) fell 15% to $918 million. Operating income dipped 10% to $1.6 billion and revenue was about flat — down 1.8% to $18.8 billion. The figures largely reflect a stronger yen, which makes Sony products more expensive in foreign markets and erodes the value of the company’s earnings outside Japan.

According to Sony, if the value of the yen had remained the same from the year-earlier quarter, operating income would have increased by 38% and sales would have grown by 10% because the same number of dollars in sales would have translated to more yen.

Film drop

At Sony Pictures, revenue dipped 5.8% to $1.27 billion and operating income fell 23% to $81 million. Despite the smashing box office success of “Stuart Little,” released late in the quarter, Sony’s film slate during the period also included underperformers like “Random Hearts.” And the division faced higher startup losses on network TV series, the company said. It was paying for a grand total of nine first- or second-season series, including “Family Law,” “King of Queens” and “Ladies Man,” compared with six in the year-earlier period.

On the bright side, the quarter benefited from the initial TV airing of “Men in Black,” the domestic homevideo release of “Big Daddy” and — of course — “Stuart Little.” On a constant currency basis, sales rose 8% and operating income fell 8%.

In music, sales fell 9% to $2 billion and operating income dropped 27% to $210 million. A strong U.S. showing was bogged down by weaker results at Sony Music Entertainment Japan as well as higher spending on talent development worldwide. Celine Dion’s “All the Way — A Decade of Song,” Mariah Carey’s “Rainbow” and Will Smith’s “Willennium” were top sellers during the quarter.

On a constant currency basis, sales were flat and operating income down 19%.

Music remainder

Sony remains one of only four major music groups after Time Warner’s recent proposal to pool Warner Music and EMI. That combined company will rival Seagram Co.’s Universal Music as the world’s biggest player, leaving Sony and Bertelsmann’s BMG Entertainment as the small fry — relatively speaking. Speculation continues to link the two with each other, or with possible counter offers for EMI.

Electronics was the only unit able to post a profit despite the currency issue, with operating income rising 25% to $844 million and sales nosing higher by 2.3% to $12.8 billion.

Sony cited continuing economic growth in the U.S. and Europe plus signs of recovery in Asia. And it noted strong demand for CD-R and CD-RW drives and electronic components like semiconductors. On a constant currency basis, sales would have been 15% higher and operating income up a whopping 115%.

Vidgame slowdown

Sony’s game division, consisting mainly of game consoles and software, saw sales fall 23% and operating income 27%. In constant currency terms, sales fell 12% and income rose 4%. The company’s PlayStation game business slowed as consumers held off buying the 5-year-old PlayStation game machines ahead of the release of the new PlayStation2 starting this spring.

Sony shares, which have blasted higher over the past year, rose on the earnings news, gaining 2.5% to close at $245.25 on Wednesday.

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