Sony 2000 Annual Report Download - page 57

SONY CORPORATION ANNUAL REPORT 2000
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reduce inventory. In addition, aiming to create new engi-
neering and manufacturing systems directly linked to the
market, Sony redefined the roles of its “Network Compa-
nies,” which further the Electronics business, as business cre-
ation units which will focus on activities such as research
and development and product planning. Also, Sony intends
to gradually transfer major parts of work relating to design
and manufacture to new platform companies currently
planned to be established from the second half of the fiscal
year ending March 31, 2001.
For a strategy of future growth, Sony has been promoting
the development and introduction of network related equip-
ment which employs Memory Stick IC recording media and
i.LINK digital interface protocol and adopts copyright pro-
tection technology. Sony also intends to achieve
interoperability among digital distribution technologies and
digital distribution services. Memory Stick was developed
for various kinds of digital equipment and already more than
3 million units have been shipped. Sony is working for the
adoption of the format in such industries as electronics, com-
puters, telecommunications, and automobiles worldwide, and
many companies have agreed to support it. Regarding net-
work related equipment, Sony, in collaboration with other
companies, is proceeding with the development of hard-
disk based personal video recorders, the establishment of a
new-generation digital broadband communications platform
that will permit the offering of an array of advanced interac-
tive services including video-on-demand, the development
of next-generation handheld network products, and others.
In the area of flat panel displays, Sony reached a basic agree-
ment in April 2000 to cooperate with Fujitsu Limited and
Hitachi, Ltd. in the plasma display panels business, by in-
vesting approximately 5.0 billion yen in Fujitsu Hitachi Plasma
Display Limited. Also, Sony is undertaking joint develop-
ment efforts with respect to high-voltage Field Emission Dis-
plays for next-generation flat panel displays with Candescent
Technologies Inc.
Positioning of Finance and Insurance
Businesses in the Sony Group
Sony is seeking to position such businesses as Sony Finance
International, Inc., Sony Life Insurance Co., Ltd., Sony Assur-
ance Inc., and a net bank that is preparing to obtain a bank-
ing license together as another main business pillar alongside
such sectors as electronics and entertainment. The total capi-
talization of the net bank, which Sony Corporation plans to
establish with The Sakura Bank, Limited and J.P. Morgan &
Co. Incorporated or an affiliate, will be 37.5 billion yen, 30.0
billion yen of which will be provided by Sony Corporation.
Sony has invested in Monex, Inc., which was established
for providing individual customers with securities trading
services via the Internet. Monex, Inc. started the services in
October 1999.
Forecast of Consolidated Results
Factors which may affect Sony’s financial performance in-
clude the following: general market factors in major areas
where Sony conducts its businesses such as general eco-
nomic conditions and levels of consumer spending, foreign
exchange fluctuations, taxation policies of individual coun-
tries, and trading tariffs as well as subjective and changing
consumer preferences and changing demographics, penetra-
tion ratios of products, Sony’s ability to continue to design,
develop, manufacture, sell, and win acceptance of its prod-
ucts and services, procurement of key devices, high levels of
research and development expenses and long-term invest-
ment for making high value-added and digital network prod-
ucts, and various costs including expenses for raw materials,
personnel, and licenses.
Regarding the forecast of consolidated results for the fis-
cal year ending March 31, 2001, although strong demand for
digital AV and information and communication equipment is
expected to continue, in view of expected severe competi-
tion and lower prices, along with an increase in the number
of competitors in the digital network area and the impact of
foreign currency fluctuations, the environment for Sony is
expected to remain difficult. As a result, Sony forecasts that
sales and operating income are expected to increase, in-
come before income taxes to decrease, and net income to
be virtually flat compared with the fiscal year ended March
31, 2000. This forecast assumes that the yen will continue to
strengthen against the U.S. dollar and euro compared with
the fiscal year ended March 31, 2000. Also, this forecast does
not include the effect of a proposed new accounting state-
ment, the final version of which is expected to be issued by
the Accounting Standards Executive Committee (“AcSEC”) of
the American Institute of Certified Public Accountants shortly.