The PlayStationPortable (PSP) introduced a new model and the strength of the business has led to the upward revision of PSP unit sales forecast. The company now expects to sell another four million units from the initial forecast of nine million units. Third quarter unit sales for PS3 were about five million units and the downward revision of unit forecasts from 11 million units to 9.5 million units has been necessitated by the unlikelihood of second half sales reaching levels required to cover hikes in the first half of the fiscal year.

The operating income for the Game segment was up by ¥67.1 billion year-on-year as the segment recorded its first quarterly profit in two years of ¥12.9 billion.

The segment inventory levels jumped 77% to ¥183 billion from last year’s levels due to a build-up of finished goods stock. Sequentially, stock decreased by 26%.

In the Pictures segment, sales dropped by 25% year-on-year to ¥223.8 billion.

This was due to depressed revenues from films released in the theatrical and TV markets. The fewer theatrical films released during the quarter were of inferior status to the ones released the same quarter last year.

The segment operating income dipped a massive 50% to ¥13.2 billion. This was a result of the joint effects of underperformance of the films released theatrically in the current quarter as compared with those released in the same quarter last year as well as the softer revenues from films released in the TV market.

The management reported a 21% year-on-year decline in revenues under the Financial Services segment to ¥135.9 billion due to a decrease in revenue at Sony Life.

The management reported an operating loss at Sony Life of ¥6 billion compared with an operating income of ¥26 billion in the same quarter last year.

The segment operating loss of ¥4.2 billion was incurred due to the offsetting effects by the deteriorating net valuation gains from convertible bonds, impairment loss on equity securities and deterioration in net gains from investments. All these offsetting effects were triggered by the bearish trends on the Japanese stock market.

Sales for the all Others segment increased by 2% to ¥96 billion versus the same quarter last year.

This was due to the consolidation of Famous Music, acquired by Sony/ATV Music Publishing. The higher revenue fees from broadband connection services at Sony Entertainment Corporation also helped the quarterly sales increase as well as increased royalty income from Sony Ericsson.

Operating income under this segment decreased by ¥2 billion to ¥10.3 billion.

The JV with Bertelsman, Sony BMG, posted flat year-on-year sales.

Despite the decline in worldwide music market, favorable sales of recent releases and positive impact of foreign currency on sales outside the U.S. anchored the positive trend.

Cost reduction at Sony BMG was on course and the venture recorded ¥11.5 billion in equity and net income.

Fiscal 2007 Guidance

- The company maintains a six-fold increase in operating income for the full year.
- Net income is still expected to grow three times year-on-year.
- Fourth quarter foreign exchange rates are expected to be ¥105 to $1 and ¥150 to €1.
- Consolidated sales are expected to be ¥8.98 trillion and net income of ¥340 billion.

The operating income for the fiscal year ended March 2008 has net income increase of ¥10 billion from last forecast of ¥330 billion and a ¥40 billion drop in operating income to the new ¥410 billion. This is due to expected appreciation of the Yen versus the dollar and euro from previous assumptions.

- The non-performing financial markets have led to lower expectations of gains from asset sales in the fourth quarter versus original forecasts.
- Other income and expenses are to be affected by increases in the gain from foreign exchange contracts versus the October forecast.

- The IPO gains are now forecast to be larger than initially forecast. This is due to the exercise of the Greenshoe Option omitted in the last forecast.
- The stronger performance of Sony Ericsson has resulted in the management raising equity and net income of affiliated companies forecast by ¥10 billion.