Annual Report 2008 Year Ended March31, 2008
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(1,1) -1- 184295.indd 08.8.7 2:22:12 PM Annual Report 2008 2008 Annual Report Year Ended March 31, 2008 Ended March 31, Year Annual Report 2008 184295.indd 1 008.8.78.8.7 22:22:12:22:12 PPMM (1,1) -2- 184295.indd 08.8.7 2:21:53 PM Contents Financial Highlights 1 Business Overview 2 Letter to Shareholders 4 Mid-Term Corporate Strategy 8 Review of Operations 14 Special Features OLED Television 16 FIFA Partnership Program 22 Blu-ray Disc 36 Corporate Governance/New Directors and Corporate Executive Offi cers 40 Corporate Social Responsibility 44 Cautionary Statement Statements made in this annual report with respect to Sony’s current plans, estim Financial Section of Sony. Forward-looking statements include, but are not limited to, those statem “might” and words of similar meaning in connection with a discussion of future o A Message from the CFO 48 other materials released to the public. These statements are based on manage uncertainties could cause actual results to differ materially from those discussed Sony to update or revise any forward-looking statements, whether as a result of Operating and Financial Review 49 are not limited to (i) the global economic environment in which Sony operates, as and the U.S. dollar, the euro and other currencies in which Sony makes signifi can as well as achieve suffi cient cost reductions for, its products and services, inclu Consolidated Financial Statements 92 product introductions, rapid development in technology and subjective and chang to recoup large-scale investments required for technology development and incre ability to implement successfully its network strategy for its Electronics, Game an Stock Information 100 in its Pictures segment and the music business in light of the Internet and other capital expenditures, to correctly prioritize investments (particularly in the Electro joint ventures and alliances; (x) the outcome of pending legal and/or regulatory p Stock Acquisition Rights and Management in the Financial Services segment; and (xii) the impact of unfavorabl Bond Information 101 of the Financial Services segment. Risks and uncertainties also include the impac Investor Information 102 Cover page design concept: Represents the joy and excitement inspired by Sony’s diversifi ed businesses, products and services, as well as Sony’s global presence and innovation. 1184295.indd84295.indd 2 08.8.7 2:21:52 PM Financial Highlights Sales and operating revenue Operating income ¥8,871.4 billion +6.9% ¥374.5 billion 5.2 times Rose 6.9%, owing to increased sales in the Electronics and Game More than fi ve times the previous year’s level, bolstered by operat- businesses, achieving a fi scal-year record ing income gains in the Electronics and Pictures businesses and a decrease in the operating loss in the Game business (Yen in trillions) (Yen in billions) 0 2 4 6810 0 100 200 300 400 500 3.0% 2006 7.5 2006 226.4 0.9% 2007 8.3 2007 71.8 4.2% 2008 8.9 2008 374.5 068102 4 *Years ended March 31 Operating income Operating margin (%) *Years ended March 31 Net income Free cash fl ow (excluding Financial Services) ¥369.4 billion 2.9 times ¥504.2 billion A fi scal year record, refl ecting higher operating income, as well as Substantial increase in free cash fl ow, a result of higher net income an improvement in net non-operating income and an increase in and gains on the sale of shares in a fi nancial services subsidiary equity in net income of affi liated companies (Yen in billions) (Yen in billions) 0100 200 300 400 -800 -400 0 400 800 4.1% (44.4) 2006 123.6 2006 (296.4) 252.0 3.8% 2007 126.3 2007 (431.1) 305.6 (125.5) 10.8% 2008 369.4 2008 (14.9) 519.1 504.2 09123 6 Net income ROE (%) Cash fl ows from operating activities Cash fl ows from investing activities *Years ended March 31 Free cash fl ow (Combined total of cash fl ows from operating and investing activities) *Years ended March 31 Capital expenditures R&D investment ¥335.7 billion ¥520.6 billion (Yen in billions) (Yen in billions) 0 200 400 600 800 0 200 400 600 800 2006 384.3 2006 531.8 2007 414.1 2007 543.9 2008 335.7 2008 520.6 *Years ended March 31 *Years ended March 31 1 008SonyE_P1_P13_0804.indd8SonyE_P1_P13_0804.indd 1 008.8.78.8.7 22:17:37:17:37 PPMM Business Overview (Fiscal Year in Review) Proportion of sales* by business segment Proportion of sales* by region and Electronics sales by product category Audio (9%) 3.5% 6.2% Video (22%) 25.5% 23.2% Electronics 9.7% Japan Game Televisions (23%) U.S.A. Pictures Europe 2008 13.7% 2008 Financial Services Information and Other Communications (19%) All Other 66.9% 26.2% 25.1% Semiconductors (4%) Components (14%) Other (9%) *Year ended March 31 *Year ended March 31 *Percentage of sales and Electronics *Percentage of sales and operating revenue to outside customers operating revenue to outside customers *Sales and operating revenue accounted for by customers in each particular region Electronics Sales: ¥6,613.8 billion (+8.9%) Sales in the Electronics business increased 8.9%. Operating income: ¥ 356.0 billion (+121.8%) Higher unit sales of BRAVIA™ LCD televisions, VAIO™ PCs and Cyber-shot™ compact Sales Operating income Operating margin (%) digital cameras in all regions contributed to higher segment sales. (Yen in billions) Operating income was 2.2 times higher than in fi scal year 2006. 6,613.8 6,072.4 The sharp increase in operating income was primarily due to higher segment sales and 5,190.2 the positive impact of the yen’s depreciation against the euro. 5.4% Also contributing to the increase in operating income was a ¥51.2 billion provision 2.6% recorded in the previous fi scal year for charges related to the notebook PC battery 0.1% 356.0 pack recalls and subsequent global replacement program, and a ¥15.7 billion reversal 8.8 160.5 2006 2007 2008 of the same provision recorded in the period under review. *Years ended March 31 Game Sales: ¥1,284.2 billion (+26.3%) Sales in the Game business rose 26.3%. Operating loss: ¥ 124.5 billion ( – ) Hardware sales increased, due to higher sales of PLAYSTATION®3 (PS3™) and PSP® Sales Operating income (loss) Operating margin (%) (PlayStation®Portable). Sales of PS3™ software contributed to an increase in software (Yen in billions) sales. 1,284.2 Operating loss reduced by ¥107.8 billion. 958.6 1,016.8 The reduction in the operating loss refl ects decreased operating losses in the PS3™ business—a result of successful PS3™ hardware cost reductions and increased sales 0.9% of PS3™ software—as well as the strong performance of the PSP® business. 8.7 (232.3) (124.5) 2006 2007 2008 *Years ended March 31 2 008SonyE_P1_P13_0804.indd8SonyE_P1_P13_0804.indd 2 008.8.78.8.7 22:17:38:17:38 PPMM Pictures Sales: ¥857.9 billion (–11.2%) Sales in the Pictures business decreased 11.2%. Operating income: ¥ 54.0 billion (+26.5%) The decline in sales refl ected lower worldwide motion pictures sales as fewer fi lms were Sales Operating income Operating margin (%) released during the period. (Yen in billions) Operating income rose 26.5%. 966.3 857.9 Higher operating income was the result of the strong performance of prior year fi lms in 745.9 6.3% the home entertainment and television markets, as well as the sale of a bankruptcy 4.4.% 3.7% claim against a former licensee of fi lm and television product. 27.4 42.7 54.0 2006 2007 2008 *Years ended March 31 Financial Services Revenue: ¥581.1 billion (–10.5%) Revenue in the Financial Services business declined 10.5%. Operating income: ¥ 22.6 billion (–73.1%) Sony Life Insurance Co., Ltd. (Sony Life) reported a decrease in revenue due to a net Revenue Operating income Operating margin (%) loss from investments in its separate account, a deterioration of net valuation gains (Yen in billions) 743.2 from convertible bonds and an impairment loss on equity securities in its general 25.3% 649.3 account, all of which resulted from a sharp decline in the Japanese stock market. 581.1 Operating income fell 73.1%. 13.0% The deterioration of net valuation gains from convertible bonds and an impairment loss 188.3 on equity securities in Sony Life’s general account led to a decrease in overall segment 3.9% 84.1 operating income. 22.6 2006 2007 2008 *Years ended March 31 All Other Sales: ¥382.2 billion (+7.6%) Aggregate sales from businesses in this category increased 7.6%. Operating income: ¥ 50.2 billion (+73.9%) Higher sales were largely due to the contribution from sales at a U.S. music publishing Sales Operating income Operating margin (%) company acquired during the period, the receipt of a settlement payment related to (Yen in billions) 411.5 copyright infringement claims, an increase in sales at Sony Music Entertainment 382.2 355.1 (Japan), Inc., and higher fee revenue from broadband connection services, particularly 13.1% fi ber-optic, at So-net Entertainment Corporation. Operating income climbed 73.9%. 8.1% 4.8% Operating income increased mainly as a result of a gain on the sale of the Sony Center 50.2 18.8 28.9 am Potsdamer Platz in Berlin, the receipt of payment related to copyright infringement 2006 2007 2008 claims and an increase in trademark royalty income from Sony Ericsson Mobile *Years ended March 31 Communications AB.