Sony Profit Drops Less Than Expected

Sony Corp., whose stock soared last year because of plans for a sweeping overhaul, said Wednesday that its fiscal third-quarter profit fell less than expected, thanks to a turnaround in its revamped electronics business.

Net income fell 17% for the three months ended Dec. 31, to 93.6 billion yen ($884 million) from 112.3 billion yen a year earlier. Four analysts surveyed by Bloomberg had expected a 35% profit drop.

Investors have flocked to the Tokyo-based conglomerate’s shares since Sony in March increased its emphasis on making computerized household products that can link to one another. The company plans to eliminate 10% of its work force and close some factories to cut costs.

The pressure on Sony to overhaul its operations was heightened this month with the news that America Online Inc. had agreed to buy Time Warner Inc. Those companies’ combining would threaten Sony’s networking vision, its traditional music business and its stand-alone electronics products.

Though earnings were better than expected, the quarter marks the sixth straight one in which the company’s profit declined.

Slumping sales of Sony’s 5-year-old PlayStation game console and a strong yen were behind much of the decline. U.S. sales provide a third of revenue.

Sony plans to introduce a successor to its PlayStation in March and build a game console that can link to other Sony appliances and connect to a much larger network of programming, entertainment and financial services over the Internet.

Sony’s American depositary receipts rose $6 to close at $245.25 in New York Stock Exchange trading.

Sales in Sony’s games division fell 23.5% for the quarter to 240 billion yen as PlayStation shipments shrunk 13%. Earnings got a lift from sales of Vaio computers and digital cameras, which drove the company’s electronics business to its first profit increase in a year.

Sales at Sony’s music division-- which would face an additional threat with Time Warner’s combining its music business with EMI Group’s, as Time Warner said this week that it would do--fell 9.2% to 213.9 billion yen. Movie division sales fell 5.8% to 129.4 billion yen.

Music sales, especially in Europe, Latin America and Japan, were hurt by a lack of hit songs. In the struggling movie division, sales fell 6% and profit fell 23% as the stronger yen bit into earnings overseas and the company wrote off some movies that didn’t perform up to expectations.

Sony dropped to No. 6 in U.S. box-office receipts last year from No. 4 in 1998, hurt by duds such as “Jakob the Liar.” This year has begun well, however, thanks to a strong showing by “Stuart Little.”