Thursday July 27, 6:07 am ET

By Yuri Kageyama, AP Business Writer

Sony Returns to Profit in April-June Quarter, Lifted by Recovery in Electronics Division

TOKYO (AP) -- Sony returned to profitability in the April-June quarter on the back of strong sales of flat-panel TVs and digital cameras, signaling a possible turnaround under its first foreign chief executive, Howard Stringer.

The Japanese electronics and entertainment company recorded a 32.3 billion yen, or $276 million, profit during the fiscal first quarter, it said Thursday. Sony Corp. had posted a 7.3 billion yen loss the same period last year.

Quarterly sales jumped 11 percent to 1.74 trillion yen, or $14.9 billion, from 1.57 trillion yen a year ago.

Sony`s core electronics section, long battered by competition from cheaper Asian rivals, also was back in the black in the latest quarter, boosted by healthy sales of liquid-crystal display TVs, digital cameras, camcorders and laptops. Sales in the electronics division surged 13.5 percent.

``The Da Vinci Code,`` which raked in more than $740 million at worldwide box offices, boosted sales in Sony Pictures Entertainment 41.8 percent. But the film section racked up an operating loss for the quarter because of higher marketing costs for upcoming works.

The Tokyo-based manufacturer of the Walkman portable music player and PlayStation video-game machine is in the midst of a turnaround effort under Stringer, a dual U.S.-British citizen who took the helm at Sony a year ago.

The company is closing plants, shedding jobs and ditching unprofitable operations. But its main challenge has been to regain growth in its electronics business, which comprised more than 70 percent of Sony`s overall revenue in the quarter just ended.

``Our electronics business is on track to a recovery,`` Chief Financial Officer Nobuyuki Oneda said.

Oneda said Sony had already reduced 9,600 of the 10,000 jobs it had promised to cut by March 2008, or about 6 percent of its global work force.

Restructuring charges added 10.7 billion yen ($91.5 million) in expenses for the latest quarter, an improvement from the 15.9 billion yen expense chalked up the same period a year ago, Sony said in a statement.

Sony, whose sprawling empire reaches Hollywood movies, financial services, video games and a music joint venture, kept its forecast for the full fiscal year through March 2007 at a 130 billion yen ($1.1 billion) profit. But it raised its sales forecast to 8.23 trillion yen ($70.4 billion), up from 8.20 trillion yen ($70.1 billion) in April.

In its gaming division, sales dipped 29 percent because of a decrease in sales of the PlayStation 2 console, as consumers await the release of its upgrade PlayStation 3 slated for November.

Sales of PlayStation Portable handheld machines also fell, according to Sony. Development and other preparation costs for the PlayStation 3 enlarged operating losses at the game section.

In financial services, sales dipped 19.3 percent, mainly due to a decrease in revenue at Sony Life. Operating profit plunged 79 percent in financial services as the dwindling value on bonds offset gains from insurance premiums.

Sony`s holdings in ventures and other endeavors had a mixed effect on earnings.

The joint venture with Samsung Electronics Co. of South Korea to make liquid crystal display panels for TVs added 3.4 billion yen ($29 million) in equity income. Sony Ericsson Mobile Communications AB, in which Sony invests with the Swedish wireless equipment maker, contributed 10.2 billion yen ($87 million).

But Sony BMG Music Entertainment, set up in 2004, produced an equity loss of 3.6 billion yen ($30.8 million) as the overall market continued to decline and key releases were postponed. Among the best-selling albums were the country music trio Dixie Chicks` ``Taking the Long Way,`` and American rock band Tool`s ``10,000 Days.``

Sony also booked an equity loss of 2.6 billion yen ($22 million) for Metro-Goldwyn Mayer Inc., which was better than the loss for the previous year. A consortium led by Sony completed the acquisition of MGM in April 2005.

The company`s stock is up 28 percent higher since Stringer took over, but is still worth about half of what it was five years ago. On Thursday, it rose 2.2 percent to 5,020 yen ($43). The earnings report was released after the market closed.