Restructuring costs took a bite out of Sony's annual profits, but are expected to boost earnings in the coming year, the company announced today.

Sony reported sales and operating revenue from April 1 to March 31, 2004, rose 0.3 per cent to $71 billion as of March 31. Operating income fell 46.7 per cent to ¥98.9 billion and net income was down 23.4 percent to ¥88.5 billion.

The company spent ¥168.1 billion during the year on the sale and disposal of idle factories and payments to staff who agreed to take the early retirement program.

The vast majority of the restructuring money was spent in Sony's core electronics business. The result was an operating loss of ¥35.3 billion on 0.9 per cent lower sales of ¥4.9 trillion. Following what has become a familiar pattern, sales of digital consumer electronics increased while those of audio equipment and products such as CRT televisions declined. The company recorded unit sales gains in all of its key product sectors although sales of DVD recorders were below expectations.

Sales of DVD recorders in the fiscal year were 650,000 units – falling short of the 1 million originally forecast. This was attributed to lower-than-expected sales of the PSX, which launched in Japan in December. Sony's PSX combines the functions of a DVD recorder with PlayStation 2. Sony expects to ship 2 million DVD recorders in the year ahead.

Sony also expects better performance from its Vaio PC business in the current year than last year, when it shipped 1.3 million desktops and 1.9 million notebook Vaios. Sony anticipates selling 2.4 million Vaio notebooks this year.

Shipments of other key products including camcorders, digital-still cameras, DVD players and flat-panel televisions are all expected to rise.

Sony's game business has suffered: Sales and operating revenue fell 18.3 per cent to ¥780.2 billion and operating income dropped 40 per cent to ¥67.6 billion. Lower unit sales of the PlayStation 2 in the US and lower prices worldwide contributed to the decline. The year marked the first drop in shipments of the PlayStation 2, down 2.4 million units to 20.1 million. The console was first launched in Japan in 2000 and sales are slowing as market penetration grows.

Sony expects PlayStation 2 shipments to fall to 14 million units this year, though it hopes to mitigate this with the launch of its handheld gaming device the PSP.

Sony said it expects sales and operating revenue to increase about 1 per cent to ¥7.55 trillion, operating income to jump 62 per cent to ¥160 billion and net income to rise 13 per cent to ¥100 billion this year.