- Summary: Sony's Q2 results suggest that CEO Howard Stringer's turnaround plan may be succeeding. Sony's electronics division, which accounts for three quarters of its revenue, turned to a profit versus a loss a year ago. Revenue rose 11% to 1.74 trillion yen due to strong demand for Cybershot digital cameras, Vaio laptop PCs and broadcast equipment. Net profit of 32.3 billion yen ($277.7 million) compared to a 7.3 billion yen loss a year earlier. Sony's strongest growth was in movies, driven by the Da Vinci Code, with revenue up 42%. Financial services revenue fell 19% due ot losses in corporate bond investments. Sony's gaming business was down 29%. Sony plans to launch its PlayStation 3 game console in November, when Nintendo will also release its new Wii console. Microsoft's Xbox 360 is already on the market.
- Comment on related stocks/ETFs: More detail on Sony's results are in Steven Towns' report. Sony's electronics results, for example in digital cameras, are consistent with earnings reports from Canon (NYSE:CAJ) and Mastushita (NYSE:MC). Canon raised its 2006 forecast for digital camera sales by 18%, and Matsushita's sales of Panasonic digital cameras almost doubled in Q1. These results seem to support the argument made in yesterday's WSJ article that growth has moved from enterprise technology to consumer gadgets, with strong implications for all the stocks involved. One interesting point to note if this is correct: while Apple dominates the music-gadget market and Microsoft is now a strong player in game consoles, the other major consumer electronics players are Japanese companies, not US companies. That contrasts with enterprise software and hardware, which are dominated by US companies.
Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):