Sony 2007 Annual Report Download - page 84

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insurance financial strength rating (Aa3), AM Best Company Inc.
for financial strength rating (A+), R&I for insurance claims paying
ability (AA) and the Japan Credit Rating Agency Ltd. for ability to
pay insurance claims (AA). Sony Bank obtained an A- rating
from S&P for its long-term local/foreign currency issuer ratings
and an A-2 rating from S&P for its short-term local/foreign
currency issuer rating.
RESEARCH AND DEVELOPMENT
In its mid-term corporate strategy announced on September 22,
2005, Sony stressed that the most pressing issue confronting
Sony today is the revitalization of its Electronics business. The
strengthening of the competitiveness of Sony’s technologies
and its products is an important element of both the revitaliza-
tion of the Electronics business and Sony’s growth strategy, and
Sony expects that research and development activities that
support this competitiveness will remain pivotal to its mid-
to long-term strategy.
Research and development is focused in four key domains: a
common development platform technology for home and mobile
electronics and the technologies essential for product differentia-
tion and for creating value-added products, semiconductor,
device, and software technologies.
Reflecting Sony’s mid-term corporate strategy, in October
2005, Sony established the Display Device Development Group,
to accelerate the development of organic light-emitting diode
(“OLED”) displays, and the Technology Development Group,
to strengthen software development. In April 2007, Sony
expressed its intention to begin selling 11-inch OLED flat
panel televisions during 2007.
Research and development costs for the fiscal year ended
March 31, 2007 increased 12.1 billion yen, or 2.3 percent, to
543.9 billion yen, compared with the previous fiscal year. The
ratio of research and development costs to net sales (which
excludes financial service revenue) decreased from 7.8 percent
to 7.1 percent. The bulk of research and development costs
were incurred in the Electronics and Game segments. Expenses
in the Electronics segment increased 22.3 billion yen, or 5.3
percent, to 440.4 billion yen, whereas expenses in the Game
segment decreased 10.8 billion yen, or 9.9 percent, to 97.9
billion yen. In the Electronics segment, approximately 62 percent
of expenses were for the development of new product proto-
types while the remaining approximately 38 percent were for
the development of mid- to long-term new technologies in such
areas as semiconductors, communications and displays. In the
Game segment, research and development costs decreased
mainly due to the completion of most of the PS3’s research and
development phase.
DIVIDEND POLICY
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.
On May 15, 2007, a year-end cash dividend of 12.5 yen per
share (the same as the amount paid in the previous fiscal year)
payable as of June 1, 2007 was approved by the Board of
Directors. Sony Corporation has already paid an interim dividend
of 12.5 yen per share to each shareholder; accordingly, the total
annual cash dividend per share would be 25.0 yen.
NUMBER OF EMPLOYEES
The number of employees at the end of March 2007 was
approximately 163,000, an increase of approximately 4,500
employees from the end of March 2006. Although there was a
reduction in employees associated with the deconsolidation of
StylingLife and restructuring at a number of manufacturing
facilities, the total number of employees increased as a result of
a significant increase of employees at manufacturing facilities in
East Asia.
RISK FACTORS
This section contains forward-looking statements that are subject
to the Cautionary Statement appearing on the inside back cover
of this annual report. Risks to Sony are also discussed elsewhere
in this annual report, including without limitation in the other
sections of this annual report referred to in the Cautionary
Statement.
Sony must overcome increasingly intense pricing competition,
especially in the Electronics and Game segments.
Sony’s Electronics segment produces consumer products that
compete against products sold by an increasing number of
competitors on the basis of several factors including price.
In order to produce products that appeal to changing and
increasingly diverse consumer preferences, and to overcome