Sony Corporation Announces Second Quarter Results

“sales and operating revenue less costs and expenses”

Sony Corporation

1-7-1 Konan, Minato-ku

Tokyo 108-0075 Japan

No: 08-139E

3:00 P.M. JST, October 29, 2008

Consolidated Financial Results for the Second Quarter Ended September 30, 2008

Sony Corporation today announced its consolidated results for the second quarter ended September 30, 2008 (July 1, 2008 to September 30, 2008).

Consolidated sales decreased 0.5% year-on-year; local currency sales increased 5%.
Operating income decreased due to the impact from the decline in the Japanese stock market on the Financial Services segment and a ¥60.7 billion gain on sale of a portion of the former headquarters site recorded in the same quarter of the previous fiscal year.

(Billions of yen, millions of U.S. dollars, except per share amounts)
Second quarter ended September 30
	2007			2008			Change in yen			2008*
Sales and operating revenue	¥2,083	.0		¥2,072	.3		-0	.5	%	$19,926
Operating income **	111	.6		11	.0		-90	.1		106
(Equity in net income of affiliated companies recorded within operating income)	21	.1		1	.1		-94	.6		11
Income before income taxes **	109	.1		7	.3		-93	.3		70
Net income	73	.7		20	.8		-71	.8		200
Net income per share of common stock
— Basic	¥73	.5	0	¥20	.7	4	-71	.8		$0.20
— Diluted	70	.0	9	19	.8	3	-71	.7		0.19

Unless otherwise specified, all amounts are presented on the basis of Generally Accepted Accounting Principles in the U.S. (“U.S. GAAP”).

* U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥104=U.S. $1, the approximate Tokyo foreign exchange market rate as of September 30, 2008.

** Effective from the first quarter of the fiscal year ending March 31, 2009, Sony revised the presentation of its financial information to ensure that it is consistent with the way management views its consolidated operations. Since Sony considers Sony Ericsson Mobile Communications AB (“Sony Ericsson”), S-LCD Corporation (“S-LCD”) and SONY BMG MUSIC ENTERTAINMENT (“SONY BMG”) (which together constitute a majority of Sony’s equity investments) to be integral to Sony’s operations, Sony determined that the most appropriate method to report equity in net income or loss of all affiliated companies was as a component of operating income. Of the above equity affiliates, the equity earnings from Sony Ericsson and S-LCD are recorded within the operating income of the Electronics segment and the equity earnings from SONY BMG are recorded within All Other. In connection with this reclassification, consolidated operating income, operating income of each segment and consolidated income before income taxes for all prior periods have been reclassified to conform with the current quarter presentation.

Due to the above noted change in presentation of operating income to include equity in net income of affiliated companies, “sales and operating revenue less costs and expenses” is equivalent to the definition of operating income under the previous presentation. For purposes of assisting investors comparing Sony’s current information with information under the prior presentation, the table below reconciles sales and operating revenue less costs and expenses to operating income as presented above:

(Billions of yen)
Second quarter ended September 30
	2007	2008
Sales and operating revenue less costs and expenses	¥90.5	¥9.9
Equity in net income of affiliated companies	21.1	1.1
Operating income	¥111.6	¥11.0

Sales and operating revenue less costs and expenses is not a presentation in accordance with U.S. GAAP. It is presented as supplemental information for transition purposes and should be considered in addition to, not as a substitute for, Sony’s operating income and net income.

Consolidated Results for the Second Quarter Ended September 30, 2008

Sales and operating revenue (“sales”) decreased 0.5% compared to the same quarter of the previous fiscal year (“year-on-year”).

Electronics segment sales decreased 0.6% year-on-year due to the negative impact from the appreciation of the yen against the U.S. dollar despite higher sales of certain products, primarily BRAVIA LCD televisions and VAIO™ PCs. In the Game segment, sales increased 10.3% year-on-year primarily as a result of an increase in sales of PLAYSTATION®3 (“PS3”) and PSP® (PlayStation Portable) (“PSP”). In the Pictures segment, there was a 3.4% increase in sales year-on-year due to higher motion picture revenues, primarily from the strong worldwide theatrical performance of Hancock. In the Financial Services segment, although revenue from insurance premiums at Sony Life Insurance Co., Ltd. (“Sony Life”) increased, segment revenue decreased by 36.1% year-on-year due to the impact of a significant decline in the Japanese stock market.

On a local currency basis, consolidated sales increased 5% year-on-year. For references to sales on a local currency basis, see Note.

Operating income decreased 90.1% year-on-year. One of the factors causing the year-on-year decrease in operating income was a more than ¥40 billion ($385 million) impact from the decline in the Japanese stock market on the Financial Services segment. Additionally, operating income for the same quarter of the previous fiscal year included a ¥60.7 billion gain on the sale of a portion of Sony’s former headquarters site.

In the Electronics segment, operating income decreased significantly, mainly due to the deterioration of the cost of sales ratio, reflecting a decline in unit selling prices and a decrease in equity in net income for Sony Ericsson. In the Game segment, operating loss decreased significantly year-on-year primarily due to PS3 hardware cost reductions and increased sales of PS3 software, as well as strong sales of PSP hardware. In the Pictures segment, operating income increased mainly due to the increase in motion picture revenues described above. In the Financial Services segment, operating income decreased significantly year-on-year due to a deterioration in profitability at Sony Life resulting from the significant decline in the Japanese stock market.

Restructuring charges of ¥0.9 billion ($9 million) were recorded as operating expenses this quarter compared to ¥18.5 billion in the same quarter of the previous fiscal year.

Equity in net income of affiliated companies recorded within operating income decreased 94.6% year-on-year to ¥1.1 billion ($11 million). Sony recorded equity in net loss for Sony Ericsson of ¥1.6 billion ($15 million), compared to equity in net income of ¥21.1 billion in the same quarter of the previous fiscal year primarily due to a shift of the product mix to lower priced phones. Sony also recorded equity in net loss of ¥3.1 billion ($30 million) for SONY BMG, a deterioration of ¥2.6 billion year-on-year, reflecting the impact of the timing of new releases, the continued decline of the worldwide physical music market and higher restructuring costs. Equity in net income of ¥2.6 billion ($25 million) was recorded for S-LCD, a joint-venture with Samsung Electronics Co., Ltd., compared to equity in net loss of ¥0.5 billion in the same quarter of the previous fiscal year.

Income before income taxes was ¥7.3 billion ($70 million), a year-on-year decrease of 93.3%, due to the decrease in operating income discussed above.

Income taxes: During the quarter, Sony recorded an income tax benefit amounting to ¥8.9 billion ($86 million). The benefit resulted from the utilization of tax credits and a reversal of tax reserves principally due to the favorable outcome of tax audits and litigation at certain Sony subsidiaries outside of Japan.

Minority interest in loss of consolidated subsidiaries was ¥4.6 billion ($44 million), compared with ¥0.5 billion income in the same quarter of the previous fiscal year. Minority interest in loss was recorded during the quarter due to the recording of a loss at Sony Life. Sony Life is a consolidated subsidiary of Sony Financial Holdings Inc. (“SFH”), in which Sony’s ownership decreased from 100% to 60% as a result of the global initial public offering of SFH shares in October 2007.

As a result of the changes in the items discussed above, net income decreased 71.8% year-on-year to ¥20.8 billion ($200 million).

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