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Sony tumbles into red
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July 26, 2000: 9:09 a.m. ET
New US film production accounting standards hit profit
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LONDON (CNNfn) - Sony Corp., the world's biggest consumer electronics company, said Wednesday it fell into the red in its fiscal first quarter, as expected, with earnings wiped out by a one-time charge reflecting a new set of U.S. accounting standards for booking film production costs.
Sony posted a group net loss of ¥88.3 billion ($809.6 million) in the three months ended June 30, compared with a profit of ¥18.43 billion a year earlier. Sales rose 5.4 percent to ¥1.56 trillion, but operating profit fell 20.1 percent to 33.7 billion because of losses at its video game, music and movie businesses.
The Japanese company, which entered the movie business in 1989 with the acquisition of Columbia Pictures Entertainment, took a ¥101.65 billion charge in the quarter. It said new accounting rules were forcing movie firms to book all of a film's marketing expenses three months after a film's release, whereas previously they could book the expenses over 10 years.
The Tokyo-based company drastically cut its earnings forecast for the fiscal year ending in March 2001 because of the charge, reducing its group net profit estimate to ¥10 billion, from an April estimate of ¥120 billion.
Sony made its earnings report after trading closed on the Tokyo exchange. Earlier, its shares had closed up 2.5 percent at ¥10,710. The stock has fallen nearly 40 percent from a record high in March.
"Sony shares have lost some of their premium seen earlier in the year following the burst of the so-called Internet bubble," said IBJ Securities analyst Hiroyuki Iba. "What we need to see is the shares supported by a recovery in actual earnings. The game sector undoubtedly holds the key to its whole earnings climate."
Sony's game division, which last year generated more than 30 percent of total profits, posted a ¥16.04 billion operating loss in the first quarter because of high costs and slow initial returns from the March launch in Japan of its new PlayStation2 video game console.
Still, analysts expect the business to turn profitable in the third quarter when Sony launches the PlayStation2 in North America and Europe with an increase in the range of available games and software packages. 
--from staff and wire reports
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Sony
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