Jan. 29 (Bloomberg) -- Sony Corp., the world's largest maker of video-game players, may report third-quarter profit fell 50 percent after its flagship PlayStation 3 lost market share to Nintendo Co.'s Wii.
Losses from games probably drove net income down to 84.1 billion yen ($691 million) in the three months ended Dec. 31, from a record 168.9 billion yen a year earlier, according to the median estimate of five analysts surveyed by Bloomberg. Sales at Tokyo-based Sony, which reports earnings tomorrow, probably rose 9.6 percent to 3 trillion yen.
The results may highlight Chief Executive Officer Howard Stringer's failure to fend off Nintendo, whose $250 Wii console outsells the PlayStation 3 by two-to-one. Sony may still exceed its full-year profit target because of a weaker yen, sales of Bravia televisions and growth at its movie unit.
``A drop in third-quarter results is largely expected on the games division. There's no surprise unless the company further reduces its profit forecasts,'' said Mitsushige Akino, who oversees $468 million in assets at Ichiyoshi Investment Management Co. in Tokyo. Akino doesn't recommend investors buy Sony stock ``until the company improves its earnings.''
Sony in October cut this fiscal year's profit forecast to a five-year low of 80 billion yen after delays in the new PlayStation's debut and a recall of defective laptop batteries, the largest in consumer electronics history.
Shares of Sony have risen 9.6 percent in the past six months, trailing the 61 percent gain by Nintendo and Xbox 360-maker Microsoft Corp.'s 26 percent increase. Today, Sony's stock fell 1.2 percent to close at 5,730 yen in Tokyo.
Wii Wins
The game division, Sony's second-largest by revenue, probably lost 50.9 billion yen during the quarter, compared with a profit of 67.8 billion yen a year earlier, after sales fell 7 percent, according to the Bloomberg survey.
After botching the PS3's debut with production delays and cutting the price to compete against cheaper Wii and Xbox players, Sony will probably lose a record 191.9 billion yen from games this fiscal year, compared with profit of 8.7 billion yen the previous year, according to the Bloomberg survey.
Nintendo, the world's largest handheld game maker, last week reported profit in its latest quarter jumped 40 percent to 77.6 billion yen, fueled by demand for Wii consoles and portable DS game players.
In the U.S., Nintendo sold 1.1 million consoles in November and December, almost double the PlayStation 3 units shipped during the period, according to researcher NPD Group. In Japan, Nintendo sold 989,118 Wii units last year, more than double PlayStation 3 sales, according to researcher Enterbrain Inc.
TVs Help Stringer
Redmond, Washington-based Microsoft last week cut its Xbox 360 forecasts and now expects to sell 12 million units by June 30, instead of 13 million to 15 million. The company sold 10.4 million units of the console since its December 2005 debut, exceeding Microsoft's own 10 million target.
Even so, Sony's overall profit this fiscal year may beat its own forecast from sales of Bravia LCD TVs, Vaio computers and Cyber-shot digital cameras, the analysts said.
The company will probably post net income of 122.1 billion yen this fiscal year, 53 percent higher than the company's October forecast, the survey showed.
Profit at the consumer electronics division, the world's second-largest behind Panasonic-maker Matsushita Electric Industrial Co., probably increased 23 percent to 97 billion yen as revenue rose 9.4 percent to 1.75 trillion yen, according to the survey.
Sticking to Profit Pledge
Profit from cell-phone unit Sony Ericsson Mobile Communications Ltd., which this month reported profit tripled in the latest quarter, also helped ease losses from the game division, according to the analysts.
The business, which posted a loss last fiscal year, will generate 152.3 billion yen in profit this fiscal year, almost double overall operating income, according to the survey.
TV sales helped Stringer, 64, say at this month's Consumer Electronics Show that he's sticking to a pledge when he became chief executive in 2005, to increase Sony's profit margin to 5 percent by March 2008. The company had a 2.6 percent margin last fiscal year.
Sony and partner Samsung Electronics Co., the world's two biggest LCD TV makers, sell most of the sets sized 40 inches and above, according to researcher DisplaySearch.
The movie studio business probably posted a profit of 24.9 billion yen, from a loss of 400 million a year earlier, according to the Bloomberg survey.
James Bond, Spider-Man
Profit at the division will probably jump 73 percent this fiscal year, according to the survey, after Sony had a record 13 films open at No. 1 and led all other studios in U.S. ticket sales with films such as ``The Da Vinci Code'' and ``Casino Royale'' during 2006.
Movies such as ``Spider-Man 3,'' due for release in May, will probably help drive up profit, CLSA Asia-Pacific Markets analysts Atul Goyal and Sandeep Muthangi said in a Jan. 24 report.
Profit from financial services, including life and auto insurance, probably fell 63 percent to 17.5 billion yen and sales declined 11 percent to 169.5 billion yen, the survey showed.
The division's profit fell because of lower stock gains after the Nikkei 225 Stock Average's climb slowed to 6.8 percent during the quarter, Credit Suisse Group analyst William Drewry wrote in a Jan. 22 report. A year earlier, the index surged 19 percent, its fastest quarterly growth in a decade.
The company plans an initial public offering of Sony Financial Holdings Inc. as early as the year beginning April 1, according to spokeswoman Kayoko Miyako, who declined to comment on the size of the offering.
Sony may raise 300 billion yen to 400 billion yen in an IPO of the unit in July or August and may disclose the timing of the offer tomorrow, Macquarie Research Equities analyst David Gibson wrote in a note to clients on Jan. 17. The funds may be used for a stock buyback, benefiting investors, he said.
The following is a summary of earnings that analysts are predicting for Sony's third quarter and fiscal year ending March 31. Figures are in billions of yen.
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30th January 2007, 16:52
