Sony posts 5% drop in profit

Just when Sony appears to have turned around its electronics business, another part of its sprawling empire, video games, is dragging down profits, an Associated Press report said.

The Associated Press report said the Japanese electronics and entertainment company blamed the launching costs of its PlayStation 3 game console for much of the 5% drop in group net profit for the last three months of 2006 to 159.9 billion yen ($1.3 billion).

The PS3 launched in the US and Japan in November, plagued with production problems that resulted in shortages and will keep the machines out of Europe entirely until March, the report said.

The next-generation game player also faces immense competition with Nintendo's Wii and Microsoft's Xbox 360, it added.

The Associated Press report said Sony raised its earnings forecast for the fiscal year through March by 38%, however, citing a recovery in its core electronics division amid booming Christmas sales in digital cameras and flat-panel TVs.

It now expects an annual net profit of 110 billion yen ($903 million), up from an earlier 80 billion yen ($657 million), the report said.

That's still below the 123 billion yen ($1.01 billion) Sony earned last fiscal year, and under the 130 billion yen ($1.06 billion) annual profit it had forecast earlier last year, the report further said.

The gaming unit, meanwhile, posted a 54 billion yen ($443 million) operating loss during the quarter, though Sony promised business will improve by the latter half of next fiscal year, the report further said.