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Sony Profit Slumps as Prices on Electronics Slip

From Times Wire Services

Sony Corp. on Wednesday said operating profit fell almost 4.9% in the latest quarter, hurt by falling prices for electronic products because of the Asian economic slump.

Sony said group operating profit fell to $656 million in the fiscal first quarter despite support from a weak yen, which makes Japanese exports more competitive overseas.

The results disappointed some industry analysts, who were expecting a gain of more than 10% in Sony’s operating profit, given the yen’s weakness and continuing strong sales of its PlayStation game console.

Sony’s stock price has risen 20% since mid-June on anticipation that Sony would post strong results for the first quarter.

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Its group net profit grew 17.6% to $290 million mainly due to tax system changes and a one-time profit from a merger of its theater operations in North America.

Sony’s senior vice president, Masayoshi Morimoto, told a news conference that prices for its audiovisual products had been falling in Japan and overseas because of tough competition from Asian manufacturers who were slashing their prices as their currencies slumped.

“Even Sony had to cut product prices to beat competition,” Morimoto said. “Weakness in the South Korean won dealt us a particularly hard blow.”

Sales of popular products such as the Wega flat-screen TV series and Vaio personal computers rose but did not greatly contribute to Sony’s profit.

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During the quarter, Sony’s operating profit in its key electronics business--which makes up 60% of Sony’s total sales--fell 22%, Morimoto said.

Higher personnel and advertising costs in Sony’s music and other divisions put a damper on results, he said.

Operating profit in the music business doubled, thanks to a new direct marketing arrangement, and sales rose 26% on revenue from the soundtracks to the movies “Godzilla” and “Titanic” and albums from Celine Dion and Will Smith.

Movie sales declined 13.9% and operating profit fell 8.7%, mainly because of a change in accounting periods. The quarter was compared with a four-month period last year.

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Sony’s American depositary receipts fell $1.31 to close at $90.50 on the New York Stock Exchange.

At a Glance

Other earnings, excluding one-time gains and charges unless noted:

TRANSPORTATION:

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* CSX Corp., the nation’s third-largest railroad operator, said its net income dropped 33% in the second quarter to $151 million, or 68 cents a diluted share, falling short of estimates by 10 cents. CSX cited costs from the joint acquisition of Conrail Inc. and weak coal exports. Revenue fell 1.4% to $2.64 billion.

* Norfolk Southern Corp.'s second-quarter edged down 1.6% to $187 million, or 48 cents a diluted share, from $190 million, or 50 cents, a penny above the average forecast. The fourth-largest U.S. railroad said costs from the acquisition with CSX of Conrail cut its net income by $37 million, or 10 cents a share. Revenue rose 1% to $1.08, as rising general merchandise and intermodal shipments slightly outweighed a drop in auto-shipment revenue because of the strikes at General Motors Corp.

OTHER INDUSTRIES:

* Bethlehem Steel Corp.'s profit jumped 43% to $67 million, or 47 cents a diluted share, exceeding estimates by 4 cents. Bethlehem credited cost-cutting and higher shipments that overcame lower steel prices and reduced demand from General Motors. Sales slipped 1.4% to $1.19 billion. The recent acquisition of Lukens Inc. helped boost shipments 5.2% even as strikes at GM curtailed demand.

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* Boston Properties Inc., which operates as a real estate investment trust, said its funds from operations nearly doubled in the second quarter to $38.9 million, or 63 cents a diluted share, from a year earlier, when it spent the bulk of the quarter as a closely held company. The results were 2 cents higher than forecasts. Revenue at the company headed by real estate and publishing magnate Mortimer Zuckerman climbed 78% to $108 million.

* Conseco Inc. said second-quarter operating profit fell 2% to $238.4 million, or 76 cents a diluted share, meeting forecasts, as the insurance and finance company shifted some business from newly acquired Green Tree Financial Corp. to the next quarter, hoping to boost profitability. The latest results exclude a charge of $498 million charge associated with the $5.76-billion Green Tree acquisition. Total collected insurance premiums rose 12%.

* Drugstore operator CVS Corp. said second-quarter earnings grew 27% to $129.9 million, or 32 cents a diluted share, a penny higher than estimates, as sales advanced 10% to $3.76 billion. Sales at stores open at least a year increased 12%. CVS said reduced costs from integrating recently acquired chains helped results.

* Olsten Corp., provider of home health-care services and staffing for other industries, reported a second-quarter loss of $33.5 million, or 41 cents a diluted share, compared with earnings of $25.3 million, or 31 cents, a year ago. Revenue rose 11% to $1.13 billion. Olsten warned last month it would take a charge of $40 million, or 50 cents a share, to close offices, invest in technology and make changes in managed-care contracts as part of the reorganization, resulting in a loss. Before then, analysts expected it to earn on average 21 cents.

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* Pharmacia & Upjohn Inc. reported a 5% rise in second-quarter profit to $187 million, or 36 cents a diluted share, matching estimates. Sales rose 3% to $1.65 billion, led by U.S. sales of its drugs.

* Revlon Inc.'s second-quarter profit from continuing operations rose 39% to $11.7 million, or 22 cents a share, exceeding estimates by 2 cents. Sales increased 7% to $575.3 million, with particular strength from its Almay brand cosmetics.

* Starwood Hotels & Resorts said its second-quarter profit climbed more than fourfold to $259 million, or $1.21 a diluted share, from $52 million, or 86 cents, a year ago, matching estimates, as it charged higher room rates and attracted more guests to its 650 properties. Revenue was $2.3 billion, including the acquisition of ITT Corp. in February and Westin Hotels in January, compared with $244 million a year ago.


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