Sony’s Revenue Slips in Quarter

Not even Spider-Man could save Sony Corp.

The Japanese technology and entertainment giant said Thursday that missteps in its consumer electronics, music and PlayStation units dragged down its fiscal third-quarter revenue despite strong DVD sales of “Spider-Man 2.”

Revenue in the quarter that ended Dec. 31 fell 7.5% to 2.15 trillion yen, or $20.9 billion, from 2.3 trillion yen in the same quarter a year earlier. Operating profit dropped 13% to 138.2 billion yen from 159 billion yen.

Net income jumped 55% to 144 billion yen, or $1.4 billion, primarily because of a $659-million reversal in allowances for deferred U.S. taxes.

The results underscored concerns among investors that the company known for innovative devices like the Walkman had been outflanked by competitors, such as Apple Computer Inc., maker of the wildly popular iPod portable music player.

“The company knows it’s not doing well now, and the market knows that as well,” said Kazumasa Kubota, an analyst with Okasan Securities in Tokyo. “But Sony may be going through its darkest period now.”

Sony shares fell 5 cents to $36.89 on the New York Stock Exchange.

Sluggish sales of portable audio players and cathode ray tube televisions, coupled with steep price competition in higher-end flat screen TVs, eroded both sales and profit in the company’s consumer electronics division. Its revenue slipped 1% to 1.5 trillion yen. Operating income fell 23% to 49.4 billion yen.

Slower demand for digital cameras forced Sony to cut its sales target for the fiscal year ending March 31 to 14 million cameras from 15 million.

Although sales of Sony’s flat panel TVs increased, a sharp drop in unit prices hurt profitability, analysts said.

“When you start out the year with $10,000 TV sets that you sell at $6,500 at the end of the year, that’s got to hurt,” said Richard Doherty, consumer electronics analyst at Envisioneering Group in Seaford, N.Y. “They were caught up in market forces that pushed down prices sharply last year. Sony was particularly vulnerable because they had high-margin TVs that have not done well in that environment.”

Its games business was dogged by production shortages of its new redesigned PlayStation 2 console, dragging down sales in the games unit by 23% to 282.6 billion yen. Costly efforts to hasten production to meet U.S. demand in the holiday quarter led to a 37% drop in operating income to 44.6 billion yen.

In a conference call, Sony executives reiterated plans to launch its PlayStation Portable console in the U.S. in March. It has sold 510,000 PSPs since launching the device in Japan in December.

Music sales dropped 60% to 56.4 billion yen because of a dearth of hits in the quarter. Operating profit likewise dropped 26% to 12 billion yen. The division, called Sony BMG, is a joint venture with Germany’s Bertelsmann.

The sole bright spot came from Sony’s movie business, which shipped 30 million copies of “Spider-Man 2” and “Seinfeld” DVDs and videos. Those two titles helped offset the disappointing box-office performance of “Spanglish” and lifted the division’s overall revenue 12% to 203 billion yen.

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Associated Press was used in compiling this report.