TOKYO (07/26/2000) - Sony Corp. reported Wednesday that it tumbled into the red for the quarter that ended June 30. The company incurred losses of about 88.3 billion yen (US$807.7 million), which it attributed to a one-time charge, in compliance with U.S. accounting rules, that covered Sony's movie marketing costs.
Sony, which bought Columbia Pictures Entertainment in 1989, said it had to write off advertising costs in the neighborhood of 101 billion yen ($923.9 million) because of a change in U.S. accounting standards. The rule forces movie companies to write off promotional expenses three months after a film's release. Under the previous standard, companies had up to 10 years to write off such expenses.
Aside from the write-off, the Tokyo-based giant managed to report an operating profit of about 33.7 billion yen ($308.2 million), led by its strong electronics business. Sales of TVs, PCs, semiconductors, DVDs and camcorders all showed double-digit gains in the quarter.
The profit from its electronics unit rose to 55.2 billion yen ($504.9 million), from a loss of 16 billion yen during the same period a year ago. The rise was big enough to offset losses suffered by its games division, which had to cover the startup costs of the megahit PlayStation 2 game console.
On the Tokyo Stock Exchange, Sony's share price rose 260 yen, to 10,710; investors have already factored in the one-time movie ad expenses.
Sony has also revised its earnings forecast for its current fiscal year, which ends March 2001. Assuming that the dollar will average 103 yen for the rest of the year, Sony said it expects a net profit of 10 billion yen ($91.4 million) for this fiscal year, down from its earlier projection of a net profit of 120 billion yen. Its operating profit forecast for the year was revised down to 230 billion yen ($2.1 billion), from 255 billion yen.
At the conference, Sony also announced plans to set up a new company that would consolidate its 13 domestic electronic equipment manufacturing facilities. Sony tentatively calls the new company Sony EMCS AV/IT, and it projects annual sales of about 1.5 trillion yen ($13.7 billion). The new company would be responsible for all stages of domestic production for electronics equipment, including production design, production planning and material procurement.