Sony 2007 Annual Report Download - page 69

66
By region, although sales decreased slightly in Japan, there
was a significant increase in sales in North America and Europe.
Overall hardware sales increased as a result of the launch of the
PS3 in Japan, North America and Europe. However, the sales of
the PS2 and PSP® declined due to lower unit sales compared
with the previous fiscal year, and also because of a price reduc-
tion of the PS2. On the other hand, overall software sales de-
creased as a result of lower PS2 software sales, despite an
increase in PSP® software sales, as well as the contribution from
PS3 software sales, compared to the previous fiscal year.
Total worldwide production shipments of hardware and
software were as follows:
Worldwide hardware production shipments (decrease
compared to the previous fiscal year):*
PS2 . . .14.20 million units (a decrease of 2.02 million units)
PSP®. . . 8.36 million units (a decrease of 5.70 million units)
PS3 . . . 5.50 million units
Worldwide software production shipments (increase/decrease
compared to the previous fiscal year):*/**
PS2 . . . 193 million units (a decrease of 30 million units)
PSP®. . . 54.1 million units (an increase of 12.5 million units)
PS3 . . . 13.2 million units
*Production shipments of hardware and software are counted upon shipment of
the products from manufacturing bases. Sales of such products are recognized
when the products are delivered to customers.
** Including those both from Sony and third parties under Sony licenses.
Operating performance deteriorated significantly compared
with the previous fiscal year. This deterioration was primarily the
result of the loss arising from the sale of the PS3 at strategic
price points lower than its production cost during the introduc-
tory period, as well as the recording of other charges in associa-
tion with the preparation for the launch of the PS3 platform.
Operating income for the PS2 business decreased due to a
decrease in software sales while operating income in the PSP®
business increased primarily due to continued cost reductions in
hardware production. A write-down of PS3-related inventory of
81.4 billion yen was recorded in the fiscal year ended March 31,
2007 compared with a write-down of 25.0 billion yen recorded
in the previous fiscal year.
The cost of sales to sales ratio deteriorated 22.4 percentage
points, from 80.4 percent in the previous fiscal year, to 102.8
percent and the ratio of selling, general and administrative
expenses to sales increased 1.3 percentage points from 18.7
percent in the previous fiscal year, to 20.0 percent for the
reasons mentioned for the decrease in operating income above.
A significant reduction in the operating loss is expected in the
fiscal year ending March 31, 2008 due to rapid reductions in
hardware production costs and an enhanced lineup of software
titles in the PS3 business.
charges, including 5.2 billion yen of restructuring charges related
to the recording of an impairment loss for goodwill for a CRT
television glass manufacturing subsidiary in the U.S. The amount
of restructuring charges included in loss on sale, disposal or
impairment, net in the previous fiscal year was 52.5 billion yen.
The amount of operating income recorded in the Electronics
segment for the fiscal year ended March 31, 2007 increased
significantly due to an increase in sales to outside customers and
the positive impact of the depreciation of the yen. This result is in
spite of the above-mentioned recording by Sony of a 51.2 billion
yen provision that relates to recalls of notebook computer battery
packs and the subsequent global replacement program and the
recording of an additional provision related to free repairs of Sony
CCDs. The operating income from the previous year included a
64.5 billion yen gain that was recorded as a result of the transfer
to the Japanese government of the substitutional portion of
Sony’s Employee Pension Fund. Regarding profit performance by
product, excluding restructuring charges and the impact of the
net gain resulting from the transfer to the Japanese government
of the substitutional portion of Sony’s Employee Pension Fund,
digital cameras and LCD televisions, which experienced favorable
sales, and video cameras, which experienced an increase in sales
of high-value-added models, contributed to the increase in the
operating income of the segment.
● Manufacturing by Geographic Area
Slightly more than 50 percent of the Electronics segment’s total
annual production during the fiscal year ended March 31, 2007
took place in Japan, including the production of digital cameras,
video cameras, flat panel televisions, PCs, semiconductors and
components such as batteries and Memory Stick. Approxi-
mately 60 percent of the annual production in Japan was
destined for other regions. China accounted for slightly more
than 10 percent of total annual production, approximately 80
percent of which was destined for other regions. Asia, excluding
Japan and China, accounted for approximately 10 percent of
total annual production, with approximately 60 percent destined
for Japan, the U.S. and Europe. The Americas and Europe
together accounted for the remaining balance of approximately
25 percent of total annual production, most of which was
destined for local distribution and sale.
■GAME
Sales for the fiscal year ended March 31, 2007 increased by
58.2 billion yen, or 6.1 percent, to 1,016.8 billion yen compared
with the previous fiscal year. An operating loss of 232.3 billion
yen was recorded for the fiscal year ended March 31, 2007,
which was a deterioration of 241.1 billion yen from the fiscal year
ended March 31, 2006.