TOKYO - Sony reported a 72 per cent plunge in quarterly profit on Wednesday as a surging yen wiped out perks from flat-panel TV and PlayStation 3 sales, as well as box office revenue from the movie "Hancock."
Sony Corp. marked a net profit of $214 million for the July-September period, down 71.8 per cent from the previous year. Sales in the fiscal second quarter slipped 0.5 per cent to $21.4 billion.
Sony makes about 80 per cent of its sales overseas and is extremely vulnerable to fluctuations in the exchange rates. A rising yen erodes overseas income when repatriated back to Japan.
The yen's recent jump was set off by the global financial crisis. International investors have been rushing to unwind "yen carry" trades, which had taken advantage of Japan's low interest rates to borrow yen to invest elsewhere. Pulling out of those positions means buying back the yen, lifting its value - and hitting exporters like Sony.
Bad times could continue for the maker of the Walkman portable as the yen last week soared to a 13-year high of nearly 90 to the dollar. In trading Wednesday, the dollar was at 97 yen.
Just last week, Sony drastically cut its full-year projections on weaker consumer demand and the strong yen. For the fiscal year through March 2009, Sony is expecting a $1.5 billion profit, down 59 per cent from the previous year, on $92.8 billion sales, up one per cent on the year.
In the July-September quarter, the dollar averaged about 107 yen, down from 117 yen the same quarter last year. That pushed down Sony's sales and operating revenue by some $1.3 billion, according to the company.
The troubles are hitting when Sony had been gradually reaping the rewards of hard work in reshaping its businesses to recoup a hammering from price competition.
Just a few years ago, Sony had begun to be criticized as losing some of its historic glamour, perhaps growing too slow in tailoring gadgets to consumer tastes, falling behind in digital music players and flat-panel TVs.
Under the leadership of Chief Executive Howard Stringer, a Welsh-born American and the first non-Japanese to head the Tokyo-based company, Sony successfully climbed back to a record profit for the fiscal year ended March 31.
These days, Sony is again growing pessimistic, acknowledging it must make more adjustments if it hopes to live out the storm of the soaring yen.
Analysts say Sony loses more than $70 million for each 1 yen gain against the euro, and $40 million for each 1 yen gain against the dollar.
Sony said it racked up an equity loss of $16.5 million for the quarter ended Sept. 30, for its stake in Sony Ericsson, its mobile phone unit, because of a strong yen and a shift to cheaper handsets.
It also recorded an equity loss of $31.9 million in Sony BMG because of a declining music market, it said. Best-sellers included Kings of Leon's "Only by the Night" and AC/DC's "No Bull."
Sony also reduced quarterly losses in the gaming business as sales in the sector improved 10 per cent. Sony sold 2.43 million PlayStation 3 consoles during the quarter, up 85 per cent from the same period a year ago.
Sony shares rose two per cent to $21 in Tokyo. Sony's earnings were announced after trading closed in Tokyo.
