Sony 2005 Annual Report Download - page 45

42 Sony Corporation
to a downsizing of the business. Sales of broadcast- and
professional-use products decreased slightly compared to the
previous fiscal year, despite recording increased sales outside
Japan, as sales in Japan decreased as a result of the recording
of higher sales, in the previous fiscal year, from the sale of
equipment to two television stations which opened new
broadcasting facilities.
“Semiconductors” sales decreased by 6.9 billion yen, or
2.7 percent, to 246.3 billion yen. The decrease was due to a
decrease in sales of CCDs as the result of pricing pressures.
Regarding LCDs, sales of low temperature polysilicon LCDs
for cellular phones increased significantly.
“Components” sales decreased by 4.3 billion yen, or 0.7
percent, to 619.5 billion yen. The decrease was primarily due
to a decrease in sales of CD-R/RW drives and optical pickups
associated mainly with significant declines in unit prices. Sales
of DVD+/-R/RW drives increased due to a production and sales
alliance with a third party. Regarding lithium-ion batteries, sales
for use in digital still cameras and cellular phones increased.
“Other” sales increased by 2.1 billion yen, or 0.4 percent, to
578.3 billion yen. The increase resulted from increased sales at
Sony’s non-Japan based disc manufacturing business. How-
ever, there was a slight decrease in sales of mobile phone
handsets mainly to Sony Ericsson.
In the Electronics segment, cost of sales for the fiscal year
ended March 31, 2005 increased by 129.1 billion yen, or 3.3
percent to 4,079.1 billion yen compared with the previous fiscal
year. The cost of sales to sales ratio deteriorated by 2.9 percent
to 81.8 percent compared to 78.9 percent in the previous fiscal
year. Products that contributed to the deterioration in the cost of
sales to sales ratio were CRT televisions and portable audio
products, which both experienced a decrease in sales, and DVD
recorders (including PSX) and video cameras, which were both
impacted by falling unit prices. Restructuring charges recorded
in cost of sales amounted to 9.6 billion yen, a decrease of 0.5
billion yen compared with the 10.1 billion yen recorded in the
previous fiscal year. Research and development costs increased
2.4 billion yen, or 0.5 percent, from 430.5 billion yen in the
previous fiscal year to 432.8 billion yen. Although there was an
increase in research and development costs within the segment
as a result of the transfer of semiconductor manufacturing
operations from the Game segment to the Electronics segment
in association with the business integration of Sony’s semicon-
ductor manufacturing operations, overall research and develop-
ment costs within the segment only increased slightly as a result
of the carrying out of a stringent process for the selection of
research and development activities.
Selling, general and administrative expenses decreased by
116.3 billion yen, or 10.9 percent to 953.4 billion yen compared
with the previous fiscal year. The primary reason for this decrease
was a decrease in restructuring charges. Of the restructuring
charges recorded in the Electronics segment, the amount
recorded in selling, general and administrative expenses
decreased by 71.4 billion yen from 124.7 billion yen in the
previous fiscal year to 53.3 billion yen. Of the restructuring
charges recorded in selling, general and administrative
expenses, the amount recorded for headcount reductions,
including reductions through the early retirement program, was
50.3 billion yen, a decrease of 67.7 billion yen compared with
the previous fiscal year. On the other hand, royalty expenses
increased 17.3 billion yen. The ratio of selling, general and
administrative expenses to sales decreased 2.2 percentage
points from the 21.2 percent recorded in the previous fiscal
year to 19.0 percent.
Loss on sale, disposal or impairment of assets, net decreased
6.0 billion yen to 23.4 billion yen compared with the previous
fiscal year. This amount includes 18.8 billion yen in restructuring
charges, which includes 7.5 billion yen related to CRT and CRT
televisions manufacturing facilities in Europe. The amount of
restructuring charges included in loss on sale, disposal or
impairment, net in the previous fiscal year was 10.6 billion yen.
An increased operating loss was recorded in the Electronics
segment for the fiscal year ended March 31, 2005 due to a
significant deterioration in the cost of sales ratio, as mentioned
above. Regarding profit performance by product, excluding
restructuring charges, semiconductors recorded an operating
loss for the fiscal year, compared to the operating profit of the
previous fiscal year. This loss was due to the recording, within
the Electronics segment, of research and development costs
related to system large scale integration (“LSI”) manufacturing,
in particular the next generation processor chip, as a result of
the integration of Sony’s semiconductor manufacturing business
operations within the Electronics segment mentioned above.
These costs were previously recorded within the Game seg-
ment. CRT televisions and portable audio products recorded a
loss for the fiscal year compared to the operating income
recorded in the previous fiscal year. DVD recorders (including
PSX) also experienced an increased operating loss. The operat-
ing income for video cameras also decreased.
On the other hand, results were positively affected by a
decreased operating loss from personal digital assistants
through the implementation of significant business downsizing,
and a significant increase in operating income recorded for PCs
and broadcast- and professional-use products.
● Manufacturing by Geographic Area
Approximately 50 percent of the Electronics segment’s total
annual production during the fiscal year ended March 31, 2005
took place in Japan, including the production of digital still
cameras, video cameras, flat panel televisions, PCs, semicon-
ductors and components such as batteries and Memory Sticks.
Approximately 60 percent of the annual production in Japan
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