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Sony Net Profit Plummets 94 Percent in Q2

Sony Net Profit Plummets 94 percent in Q2

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October 26, 2006 – Sony Corp. reported today a quarterly net profit loss of a stunning 94 percent year-over-year. Sony suffered financially in overall profits, hurt by the recall of its 9.6 million laptop batteries, but showed signs of vitality in their electronics division.

In the second quarter from July to September, Sony’s net profits dropped 1.7 billion yen ($14.3 million USD) from 28.5 billion yen ($240 million USD) this time last year, according to the BBC News.

The major factor for the overwhelming net loss is Sony's Li-ion laptop battery recall, found to be flammable in select cases. The battery recall, which affected computers by Apple, Dell, Toshiba, Fujitsu, Lenovo, and Hitachi, totals 9.6 million worldwide. In response, Sony has set aside 51 billion yen ($429 million USD) to handle the battery disaster. 

Last Tuesday, Sony execs officially apologized for the hazardous batteries and reportedly shed tears to a public audience, according to an Oct. 25th Economist.com article.

"The battery recall has shaken consumer confidence in Sony’s technological competitiveness and cast a shadow over its brand image as a top class manufacturer, which has in the past enabled it to charge a premium for its products," stated in an article by Reuters today.

Despite the overall net losses by the manufacturer, Sony’s electronics division showed quarterly sales rose 12 percent due to the popular Cyber-shot digital cameras, Bravia televisions, and Vaio computers, according to Photo Marketing Association.

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Sony’s third quarter financial results, amidst the manufacturer price war, should prove interesting in the upcoming holiday shopping season. This quarter, Sony introduced the ultra compact Cyber-Shot DSC-T50, the N2, and the T10 point-and-shoot digital cameras, and launched their first DSLR, the Alpha A100, in June. Sony plans to release the long-overdue PlayStation 3 gaming system next month, just in time for the holidays. Sony anticipates increased profits in the electronics divisions in the third quarter.

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