Sony's $1.4 billion loss in consumer products and video games offset by $1.7 billion profit in the financial services division.
Sony, best known in the U.S. for its consumer electronics and gaming systems, performed best as a Japan-based financial services company over the past fiscal year. Earnings contributions by the company's financial services division enabled the company to record positive operating income in the fiscal year ending March 31.
Sony's largest division, Consumer Products and Devices (CPD), posted $500 million in losses on $34.7 billion in sales, which nevertheless was a 60 percent improvement in operating income over the prior year, according to the company's financial results released Thursday.
The division was impacted by lower prices on BRAVIA LCD televisions, and by lower sales of Handycam video cameras and Cyber-shot compact digital cameras due to contraction of these markets. In total, lower CPD sales resulted in a reduction in gross profit of $1.1 billion. The stronger Japanese yen also pulled down CPD profits by $733 million.
Yet these negative factors were more than offset by CPD's cost-cutting measures, including $1.9 billion improvement in the division's cost of sales ratio and $1.4 billion in reduction in selling, general and administrative expenses. This has been achieved by CEO Howard Stringer's recent restructuring activities, which have included selling facilities, cutting 20,000 jobs, and relying more heavily on outsourcing for manufacturing.
Sony's second-largest division, Networked Products and Services, posted a 10 percent sales decline on $17 billion in revenues on PlayStation and VAIO products, for an $893 million loss. PlayStation Portable sales were down 30 percent and Playstation2 software down 57 percent. These declines were partially offset by a 10 percent increase in PlayStation3 software, which now contributes over half of Sony's gaming revenues.
Sony's Financial Services division contributed $1.75 billion in operating income to the parent company on $9.2 billion in revenue. The Financial Services division includes Sony Life Insurance, Sony Bank and Sony Finance International. Sony Life Insurance posted a 72 percent increase in revenue from investment gains and valuation gains from the rebound of the Japanese stock market over the past fiscal year, along with increases in insurance premiums.
Sony Ericsson, a 50-50 joint venture between the two companies, faced significant challenges in regional market conditions, particularly in Europe. Sales were down 37 percent compared to the prior year.
Server Market SplitsvilleJust because the server market's in the doldrums doesn't mean innovation has ceased. Far from it -- server technology is enjoying the biggest renaissance since the dawn of x86 systems. But the primary driver is now service providers, not enterprises.
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