PS3 Costs Impact Sony Profits

Sony has just released its results for the previous financial year, and the figures paint an interesting picture. One that many analysts have predicted with an operating income loss of about $2 billion. The actual losses came in just under that at $1.97 billion (232 billion Yen), despite the fact that sales and operating revenue for the games division increased to US $8.61 billion (1.02 trillion Yen), a 6.1% year-over-year increase.

In addition to an annual decrease in PS2 and PSP unit sales and a drop in PS2 titles, much of the reason was due to the high costs and setbacks associated with the worldwide launch of their PlayStation 3 console. This is despite the fact that overall hardware sales for the division increased due to the addition of the PS3 to the PlayStation brand. Furthermore, high PS3 production costs and the shortfall in units actually shipped to retailers had its impact. Edward Williams, an analyst at BMO Capital Markets, said, PS3 "hardware adoption continues to be hampered by the lack of a broad portfolio of platform-defining software and its high price."

Despite these bad tidings, the company paints a rosy picture for the coming year, as the company expects to make back its initial investment on the PS3. Sony forecasts sales and operating revenue to total 8.78 trillion yen (US $72.72 billion) by the end of March next year, which would represent a 6% increase. As for operating income, Sony expects to bounce back from its dismal performance this year and generate 440 billion yen (US $3.64 billion), a whopping 513% increase. [Source: GamePro]

Production of the PlayStation 2 was 14.2 million, about 1.2 million units ahead of Sony’s expectations, while production of the PlayStation Portable was 8.4 million, down 600,000 from the company’s forecast. For the coming year, Sony expects PS3 production to hit 11 million in the year that ends March 31, 2008. PSP production will also hit 9 million units, the company said. [Source: Mercury News]