Sony falls into red after film marketing charge

Sony posted net losses of 88.29bn yen ($841m) for the April-June period yesterday, falling into the red mainly because of one-off charges from a change in US accounting rules.

The quarter’s results compare with a profit of 18.43bn yen for the same period of 1999. Industry analysts and the markets had anticipated losses of up to 100bn yen, and after the announcement Sony’s shares gained 2.49 percent to close at 10,710 yen.

Sales and operating revenue for the three-month period rose 5.4 percent on the same period last year to 1,561.76bn yen. The drivers of this increase were Sony’s main electronics businesses, where sales grew by 11.7 percent, and its insurance businesses, where revenues climbed 16.6 percent. Sony’s games and music businesses saw falling sales.

However, operating income fell by more than 20 percent to 33.74bn yen, leaving a pre-tax profit of 39.14bn yen. Sony paid 101.65bn yen in charges because of a new US accounting rule that forces film companies to include all marketing expenses three months after a film’s release. Under old rules, film companies could spread the expenses over 10 years.

Analysts said these one-off charges would not affect Sony’s cash flow. There were some concerns, however, about the implications for the company’s future earnings following the international launch of the PlayStation2 games console later this year. PlayStation2 was costly to develop and sales in the Japanese market have produced low initial returns, while software sales have been unexpectedly weak.

Sony also revised upwards its earnings forecasts for the fiscal year 2000/2001. It predicts sales of 7,200bn yen, up on April’s forecast of 7,000bn yen. Sony said it expected sales to improve particularly in its digital products business and in DVD film sales. Reuters