Sony expects further games division losses

Sony is expecting to post significant losses in the current quarter, which could have a major impact on numerous divisions within the group as production and launch costs for its next-generation console spiral.

According to Reuters, Sony's senior vice president, Takao Yuhara, said that a possible increase in valuation loss on microchips used in the PS3 could have a massive impact on the group.

"We might see valuation losses of a size that we cannot laugh away in the quarter," Yuhara stated.

Sony posted a profit of 32.3 billion Yen (219 million Euro) for the quarter ended June 30th, attributed largely to growth in flat TV sales and a general surge in profitability for its consumer electronics and movie divisions.

However, the games division saw a 30 per cent drop in revenues and a massive operating loss as a result of the PS3 development, which looks set to dive further into the red as the company prepares for its November launch.

Analysts remains sceptical of an ongoing success, as it's more than just the games division at stake. Although Yuhara is confident that the company can recoup losses within a five year period, the company's huge movies division is also banking on the success of Blu-ray, and the PS3's Cell processor is set to be incorporated in a wide range of the company's consumer electronics devices.

If sales of the PS3 meet or exceed expectations, the entire group will benefit, and Blu-ray could become the dominant optical storage format. However, that success is far from guaranteed, and the ramifications of the PS3's failure to dominate the market will affect the entire organisations financial stability.