The fiscal year results are in for Sony, and as expected, they took a big hit due to the cost of the PS3. Their reported operating profit for the year ending March 31 was 71.75 billion (about $596.8 million), which is down 68% from the 226.42 billion yen (about $1.88 billion) from the previous year.
The cause for the losses were obvious, according to the report. The production costs for the PS3 were astronomical, and they decided to sell the console at a big loss. "In the Game segment, there was a significant operating loss as a result of the sale of PS3 at strategic price points lower than its production cost during the introductory period." Sony hopes to increase sales by "strengthening their software lineup this year," according to senior vice-president Takao Yuhara in a statement to the press (source: Reuters).
Still, there was surprisingly good news included in the results. Sales were actually up 10.5% despite those PS3 losses, rising to 8.3 trillion yen for the fiscal year. Sony attributes a good chunk of that promising number to the solid sales performance of Ericsson mobile phones. Furthermore, Sony predicts a huge fiscal 2008: they expect an operating profit of 440 billion yen ($3.66 billion), which they can achieve by cutting the production costs of the PS3. Now, based on recent news, that cost cut is just around the corner, so with significantly cheaper costs, the retail price on the console may fall.
No matter what the situation, we've always known a games division lives and dies with the available software for the machine it produced. It's good to know Sony understands that, and the games are indeed on the way. Given that, the predicted big increase for 2008 doesn't seem unreasonable.