Sony Expects Big Loss

Sony stockholders and executives are hoping on there next-generation console to resolve what is becoming an increasingly unpleasant financial picture for the Japanese electronics giant.

The first batch of bad news for the company arrived with the announcement of the first quarter financial results which showed the company as a whole lost $578 million in the first quarter of the current fiscal year as opposed to a loss of $492 million for the same period last fiscal year.

The company revealed that its games division the most profitable part of the Sony corporate empire was expected to post a loss of ¥100 billion or $875 million at current exchange rates over the coming fiscal year. Sony attributes this loss to the start-up costs needed to develop the PlayStation 3. In contrast, for the current fiscal quarter, the games division posted operating income of ¥8.7 billion ($75 million) and sales of ¥958.6 billion ($8.2 billion).

These projected financial results certainly provide some insight into the difficulty that Sony must be facing in regard to PS3 pricing. There is little doubt that the company will be taking a loss on each console a typical practice for the industry when introducing a new system in expectation that manufacturing costs will decline over time. However, the question remains as to the magnitude of the loss the company and its stockholders are willing to tolerate in light of the overall company’s overall lackluster financial performance.