Sony raises full-year profit forecast by 38%

Sony’s ballyhooed PlayStation 3 squeezed overall earnings last quarter, despite a boom in electronics and a Bond bonanza at Sony Pictures.

At Sony Pictures Entertainment, revenue jumped 47% to $2.5 billion. SPE swung to a solid $220 million profit from a loss the year before — buoyed by “Casino Royale” and “The Pursuit of Happyness” in theaters and “The Da Vinci Code” and “Talladega Nights: The Ballad of Ricky Bobby” on DVD.

Easy year-on-year comparisons helped: Studio took writedowns on “The Legend of Zorro” and “Zathura” in 2005.

But the troubled games division swung from a profit to a hefty $455 million loss.

Analysts had expected red ink, but maybe not so much. Sony shares fell 1.38% in New York to close at $46.35.

Overall at the company, net profit fell 5.3% to $1.3 billion; operating income at the giant Japanese conglom dropped 15% to $1.5 billion. Revenue rose 10% to $22 billion.

Nevertheless, Sony raised its full-year profit forecast by 38%, suggesting turnaround efforts led by Howard Stringer are bearing fruit.

That would be thanks to electronics, Sony’s biggest business by far and the key to any recovery. Profits there surged 103% to $1.5 billion for the third quarter ended Dec. 31, as Bravia LCD TVs and Cyber-shot digital cameras sold like hotcakes.

Sales jumped 17% to $15.7 billion.

As far as the games division goes, Sony had heavy launch costs for the PS3. It also had to sell the consoles for much less than it cost to make them.

PS3 players also rolled out later than expected and with fewer units available than its big rivals, Nintendo’s Wii and Microsoft’s Xbox 360.

Sales nosed up 5.6% to $3.7 billion.

As it grapples with games, its next generation DVD format, Blu-ray, is locked in a bitter battle with rival format HD DVD.

“We are feeling very good about Blu-ray right now, but it is early,” said Rob Wiesenthal, chief financial officer of Sony’s U.S. operations, during a conference call with investors.

He noted that the top five films of 2006 were released by studios that only release in Blu-ray — Sony, Fox and Walt Disney. Ditto for 11 of the top 15 films of the year.

“In Japan, about 96% of the hardware being sold for high-definition format are coming from the Blu-ray family. It’s a format with over 100 different CE manufacturers … and obviously we have the launch coming up in Europe for PS3. So we are feeling very good about that,” he added.

Sony is gambling that synergies between Blu-ray and PS3, which runs the format, will ultimately help each product dominate its respective market.

On the TV side, Sony said a flow of syndication coin from sales of “The King of Queens” was largely offset by production and marketing costs of new network and syndicated shows.

Sony recorded a net loss of $45 million relating to its stake in MGM.

It bought the Lion with several partners in April 2005 for $5 billion.

A tally of each quarter since then shows Sony’s total equity losses come to about $235 million — pretty close to the $257 million the company paid for its 20% stake.

A Sony rep, however, said the loss in MGM are largely due to the structure of the deal and do not reflect the studio’s operating performance.

At Sony BMG Music Entertainment, net income jumped 26% to $225 million. Sony, which owns half the joint venture, booked about $110 million.

The boost came in part from lower overhead and lower restructuring costs.

Music sales dipped 1.6% to $1.44 billion as CD sales continue to contract.

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