Sony 2005 Annual Report Download - page 6

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4 Sony Corporation
To Our Shareholders
4 Sony Corporation
A Message from Nobuyuki Idei
The Year in Review
In the fiscal year ended March 31, 2005, we recorded key strategic achievements
that positioned the Sony Group for further growth as a global enterprise. These
include strengthening our entertainment business through important alliances,
establishing a firm foundation for our mobile phone business and making significant
advances in the development of next-generation microprocessors. With regard to our
core electronics business, however, we faced an increasingly harsh operating envi-
ronment, owing to such factors as intensified price competition. Accordingly, restoring
profitability in our mainstay Electronics segment remains management’s top priority.
Sales and operating revenue in the period under review edged down from the
previous year, owing to the transfer of our non-Japanese recorded music business
to our new joint venture SONY BMG MUSIC ENTERTAINMENT (SONY BMG), which
is accounted for using the equity method, and to the impact of a strong yen. Operat-
ing income rose on the strength of strong performances by the Pictures and Music
segments, while the Financial Services segment continued to see steady gains. We
also registered a major increase in net income, reflecting contributions from Sony
Ericsson Mobile Communications AB, and other equity-method affiliates.
In the Electronics segment, we increased sales of flat panel televisions and digital
still cameras by enhancing product appeal. Nonetheless, segment sales were largely
unchanged, a consequence of flagging markets for cathode-ray tube (CRT) televi-
sions, coupled with a shift in demand from MD Walkman, CD Walkman and other
portable audio products toward hard disk and flash memory audio players. The
segment’s operating loss widened, as higher variable costs accompanying down-
ward pressure on prices outweighed the positive impact of restructuring-derived
reductions in fixed costs. In contrast, Sony Ericsson’s worldwide shipments of mobile
phones, particularly camera phones, exceeded 43 million units during the period,
significantly boosting its sales and operating profit.
In the Game segment, shipments of PlayStation 2 (PS2) software reached a record
252 million units during the period. Sales fell, however, as a result of a decline in PS2
hardware sales volume and strategic price reductions. PlayStation Portable (PSP) hard-
ware and software had a strong start, following PSP’s launch in Japan in December
2004 and North America in March 2005. A decline in the segment’s operating income
was largely attributable to a decrease in overall sales of game hardware and startup
costs for PSP.
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