Sony 2005 Annual Report Download - page 62

Sony Corporation 59
rating from S&P for its long-term/short-term local/foreign
currency issuer ratings.
RESEARCH AND DEVELOPMENT
Recognizing that research and development are indispensable
for business growth, Sony has established semiconductors,
displays, and optical technologies and related devices as focus
areas for research and development and is devoting its energies
to the development of a variety of strategic devices and innova-
tive new products as part of research and development activities
within the Network companies and business groups. Moreover,
a Technology Round Table has been set up to facilitate the
selection, consolidation and convergence of themes for research
and development, for the sharing and validation of research and
development roadmaps and to frame research and development
strategy. In addition, while continually endeavoring to improve
product quality, Sony is also striving to develop products that
are even more environmentally-friendly. During the fiscal year
ended March 31, 2005, Sony received a special commendation
and award from the Ministry of Agriculture, Forestry and Fisher-
ies of Japan for excellence in the utilization of biomass as a
result of Sony’s “technological development and proactive
implementation of vegetable-based plastics in home electronic
appliances.” Sony continues to strengthen the basic research
and development structure at two of its corporate laboratories,
the Material Laboratories and the Information Technology
Laboratories. These laboratories closely collaborate with the
research and development activities carried out by the network
companies, with the aim of forging new future markets. In
addition, Sony operates three independent research laborato-
ries; Sony Computer Science Laboratories, Inc. (focusing on
fundamental research and user interface research); Sony-Kihara
Research Center, Inc. (focusing on three-dimensional computer
graphics and image processing technologies); and Sony
Intelligence Dynamics Laboratories, Inc.
Research and development costs for the fiscal year ended
March 31, 2005 decreased 12.5 billion yen, or 2.4 percent, to
502.0 billion yen, compared with the previous fiscal year. The
ratio of research and development costs to sales (excluding the
Financial Services segment) increased from 7.5 percent to 7.6
percent. The bulk of research and development costs were
incurred in the Electronics and Game segments. Expenses in
the Electronics segment increased 2.4 billion yen, or 0.5
percent, to 432.8 billion yen, and expenses in the Game
segment decreased 14.9 billion yen, or 17.9 percent, to 68.5
billion yen. In the Electronics segment, approximately 62 percent
of expenses were for the development of new product proto-
types while the remaining 38 percent were for the development
of mid- to long-term new technologies in such areas as semi-
conductors, communications, displays and next generation
optical discs. There was an increase in research and develop-
ment costs related to semiconductor process technology
associated with the transfer of Sony Computer Entertainment’s
semiconductor manufacturing operations from the Game
segment to the Electronics segment. However, the stringent
selection of research and development activities resulted in a
small increase in research and development costs within the
Electronics segment. Research and development costs in
the Game segment remained high due to the research and
development associated with PSP and PLAYSTATION 3 (“PS3”).
REWARDING SHAREHOLDERS
Sony believes that continuously increasing corporate value and
providing dividends are essential to rewarding shareholders. It is
Sony’s policy to utilize retained earnings, after ensuring the
perpetuation of stable dividends, to carry out various investments
that contribute to an increase in corporate value such as those
that ensure future growth and strengthen competitiveness.
A fiscal year-end cash dividend of 12.5 yen per share of Sony
Corporation Common Stock was approved at the Board of
Directors meeting held on May 16, 2005 and was paid on June
1, 2005. Sony Corporation has already paid an interim dividend
for Common Stock of 12.5 yen per share to each shareholder;
accordingly, the total annual cash dividend per share of
Common Stock is 25.0 yen.
Regarding shares of subsidiary tracking stock issued in Japan
by Sony Corporation, SCN has been working to manage its
operations so as to expand cash flow, fully solidify its financial
base and increase its retained earnings to aggressively expand
its business to strengthen its foundation and respond to the
quickly expanding Internet market. For these reasons, SCN
does not plan to distribute earnings to SCN shareholders for
the time being. As such, Sony Corporation will continue its
policy of not paying dividends to shareholders of the subsidiary
tracking stock.
NUMBER OF EMPLOYEES
The number of employees at the end of March 2005 was
approximately 151,400, a decrease of approximately 10,600
employees from the end of March 2004. Although employees
increased at manufacturing facilities in Asia, particularly in China,
the total number of employees declined due to the reductions
associated with the implementation of restructuring activities in
Japan, the U.S., Europe and South-East Asia, and a decrease in
the number of employees due to the establishment of Sony BMG.
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