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6
Sony Corporation Annual Report 2002
European company, Ericsson, to form Sony Ericsson Mobile Communi-
cations (SEMC) in October 2001. As one of the originators of GSM, a
transmission standard, Ericsson is known as a company with a high
level of vanguard technology and is the best in the world when it
comes to the technology used for mobile communication base stations.
Sony’s strength lies in its ability to create new products, particularly in
the crucial product-planning and design stages. By uniting this strength
with Ericsson’s excellent telecommunications technology and ability to
set standards, SEMC is seeking to become a global market leader in
mobile phones.
Question: Mr. Tokunaka, would you summarize Sony’s operating results in Fiscal Year 2001?
Tokunaka CFO Consolidated net sales reached an all-time high. Strong growth in the
Game business more than offset weakness in our Electronics business
that resulted from adverse market conditions. These same market
forces caused operating income to fall by about 90 billion yen. But
our cash flow improved considerably. We posted positive net cash
flow, excluding Financial Services, for the first time in three years. Our
efforts to reduce inventory and our highly selective approach to new
investments raised cash flow in the Electronics business. Our enter-
tainment businesses also contributed to cash flow.
By business segment, operating income was down sharply in
Electronics, with a loss of 8.2 billion yen. The primary causes were
weakness in semiconductors and components, and quality issues
with mobile phones. Another factor was the approximately 85
billion yen in expenses for our aggressive structural reform program.
Sony-branded products performed well relative to the difficult
market conditions, with income falling only slightly.
PlayStation 2 (PS2) entered into the harvest stage as sales of the
platform grew, and we recorded profit with approximately 83 billion
yen in operating income in the Game business. In the Music business,
operating income was largely unchanged despite the shrinking of the
market due to the negative effect of unauthorized copying on sales
industry-wide. Various restructuring measures we began enacting in
Fiscal Year 2000 were responsible.