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Sony Drops Annual Forecast

As some may have expected, Sony was forced to revise its financial forecasts for this fiscal year, and the announcement isn't a happy one.

Despite some positive PS3 and next-generation news over the past few weeks, Sony still had to deal with the biggest problem: their recall of their Sony-branded lithium batteries. This worldwide operation is expected to drain 51 billion yen ($678 million) from operating profits. The company still anticipates revenues of about 8.23 trillion yen (aout $69 billion), but it has lowered its group operating profit forecast by 62% to 50 billion yen ($424 million) and net profit projection by 38% to 80 billion yen ($678 million).

As far as the game division is concerned, Sony expects a drop of 60 billion yen ($508 million) in operating profits. Although many of us could formulate a few guesses as to why, the company did outline the two primary causes for the lowered forecast-

Firstly, the changes to the specs and price of the PS3 and poor sales of the PSP and PS2. By including HDMI ports in the low-end PS3 and altering other specs, these actions contributed 14 billion yen ($119 million) to the lowered prediction. The dropped price tag of the 20GB model in Japan contributed 16 billion yen ($136 million), and lower than anticipated sales of the PSP combined with the overall drop in PS2 performance contributed 30 billion yen ($254 million) to the stripped-down forecasts.

In the electronics division, Sony cited production changes for semiconductors and other PS3-targeted devices as lowering productivity and creating a 33 billion yen ($280 million) fall in expected operating revenues.

But on the positive end, the company does (of course) expect a big reversal in profits for 2007.

10/19/2006 Ben Dutka

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