索尼 (SONY) 2006 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the third quarter 2006 Sony Corporation earnings conference call. My name is Cindy and I will be your coordinator for today. [OPERATOR INSTRUCTIONS]. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Sam Levenson, Senior Vice President Investor Relations, Sony Corporation of America. Please proceed, sir.

Thank you very much for that introduction, Cindy. And thank you all for joining us today, January 30, 2007, for the discussion of Sony's results for the third quarter of the fiscal year ended March 31, 2007.

As Cindy mentioned, I am Sam Levenson, Senior Vice President of Investor Relations at Sony Corporation of America. We are joined this evening in Tokyo by Mr. Yuhara, Corporate Executive and Senior Vice President of Investor Relations of Sony Corporation, and by Robert Wiesenthal, Group Executive in charge of Corporate Development and M&A at Sony Corporation, as well as EVP and CFO of Sony Corporation of America. Thank you both very much for joining us.

In just a few minutes I'll be giving a brief summary of today's announcement, then, Mr. Yuhara and Mr. Wiesenthal will be available to answer your questions.

Please be aware that statements made during this evening's call and Q&A session with respect to Sony's current plans, estimates, strategies and press release, and other statements that are not historical facts, are forward-looking statements about the future performance of Sony. These statements are based on management's assumptions in light of the information currently available to it and, therefore, you should not place undue reliance on them.

Sony cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements. For additional information as to risks and uncertainties, as well as other factors that could cause actual results to differ, please refer to today's press release which can be accessed by choosing Investor Relations at the bottom of the page at www.sony.com.

With that, I am now going to turn to our announcement.

I'd like to begin with a discussion of our consolidated results, highlights for the quarter and revised full-year forecast before reviewing some of our operating segments in more detail.

Consolidated sales in the third quarter were a new record; JPY2,607.7 trillion, an increase of 10% year over year. The successful recovery in the Electronics business has continued. Sales rose 17%, while operating income doubled, both of which are historical highs on a quarterly basis.

BRAVIA LCD TVs performed strongly during the holiday sales season and the TV business as a whole achieved profitability during the quarter. Other significant contributors included Cyber-shot digital cameras and the Semiconductor business, where shipments of semiconductors for use in PS3 increased. Together, these all contributed to the significant increase in operating income within the Electronics business.

The Game business, PS3 was launched in November in both Japan and the U.S., reaching a cumulative shipment of 2m units within two months. This is the fastest ramp up of shipments of any of Sony Computer Entertainment's platforms.

The Pictures segment recorded strong results during the quarter as a result if hit DVDs being released, such as Da Vinci Code, and the theatrical release of Casino Royale which has achieved new records for the Bond film franchise. The Pictures business continues on track to achieve higher profits than last year.

Sony Ericsson, an equity method affiliate, also achieved record results for quarterly sales, profit and unit shipments. More specifically, unit shipments rose 61%, reflecting the strength of the Cyber-shot and Walkman brands.

Net income with Sony Ericsson more than tripled to EUR447m. As a result, the Joint Venture contributed nearly JPY34b of equity in net income to Sony for the quarter and was a major factor in our increased earnings forecast for the year. During the quarter, Sony Ericsson moved to number three in terms of sales volume and to 9% of unit volume in the worldwide mobile handset market.

I'll now discuss each P&L line item. As I previously mentioned, consolidates sales increased 10% year on year to JPY2,607.7b due to the strength of the Electronics and Pictures segments.

Operating income decreased by 15% year on year, to JPY178.9b. Even though there was a significant increase in operating income in the Electronics segment and a considerable improvement in the Pictures segment versus last year, overall operating income decreased due to the loss recorded in the Games segment, as well as decreased operating income in the Financial Services, segment which resulted from a small rise in the Japanese equity market compared to the previous year.

Consolidated restructuring expenses during the quarter, which are recorded in the operating expenses, where income was JPY0.3b [sic - see presentation], compared with expense of JPY14.7b in the previous year. This reflects the recording of the gain from sales of [technical difficulty], for which loss reserves had been previously been recorded. Almost all of this reversal was recorded in the Electronics business.

Non-operating income decreased JPY14.7b to JPY0.9b as a result of increased foreign exchange losses and decreased gain on change in interest. The decrease in the gain on change in interest reflects a gain of JPY9.4b in the current quarter, resulting from the sale of a portion of stock in [Sony] Life Holdings as compared with a gain of JPY19b from the SoNet IPO in the previous year. As a result of all these factors, income before income tax has decreased 20% year on year to JPY179.8b.

Equity in net income of affiliated companies increased year on year by a factor of 2.2 times to JPY43b. The significant year-over-year increase is primarily due to Sony Ericsson which I discussed a moment ago. Equity in net income from Sony BMG was JPY13.1b, an improvement of JPY2.8b year on year, due to lower overhead costs as well as benefits from an industry-related legal settlement affecting the major record companies.

Our Joint Venture with Samsung, S-LCD, yielded equity in net loss of JPY0.7b which is JPY1.6b lower than last year. Finally, Sony recorded equity in net loss of JPY5.4b from MGM; a JPY3b increase in loss over the previous year. As a result of these factors, net income decreased by 5% year on year, to JPY159.9b.

Before moving to our revised forecast for the fiscal year, I would note that the initial [launch under] our structural reform plan announced last year continued either on track or ahead of schedule. We have already achieved or exceeded our goals in terms of model count reduction, headcount reduction and asset sales. And all of the remaining initiatives remain on track. Please see the Investor Relations section of our website under today's announcement for the full details if you're interested.

Next, I'd like to explain the increase in our earnings forecast for the current fiscal year.

The forecast for operating income, excluding restructuring charges, is unchanged. However, this is the result of both positive and negative developments since our previous forecast. As we have noted, the Electronics segment is outperforming our October forecast.

Conversely, the Games segment is underperforming our October forecast due to PSP sales being lower than our previous expectations, and increased charges recorded relating to the launch of PS3, partially offset by the stronger than anticipated performance of the PS2 business.

With respect to restructuring expenses, our forecast has been lowered from JPY40 to JPY30b as a result of a shift in timing of the consolidation of several businesses. This raised our operating income forecast from JPY50b to JPY60b, and our income before income tax is forecast from JPY70b to JPY80b.

Our forecast for equity and net income of affiliates has increased 50% from JPY40b to JPY60b due to the strong performance of Sony Ericsson. As a result of all these factors, our forecast for net income for the fiscal year was revised upward from JPY80b to JPY110b.

Our forecast for CapEx, depreciation and amortization and R&D have not changed from our October forecast.

Now I'd like to discuss each of our segments in a little more detail, first, Electronics. Sales in our Electronics segment increased 17%, or 14% on a local currency basis. Interest segment sales increased significantly, mainly due to sales of PS3 semiconductors recorded during the quarters. Sales to outside customers increased 10%.

By product, LCD TVs, Cyber-shot digital cameras in particular, which had strong sales in all regions, contributed to the increase in sales. VAIO PCs also contributed significantly, with strong sales of notebook PCs outside of Japan.

Operating income in Electronics doubled to JPY177.4b, an operating profit margin of 9.5%.

Products which had the largest increase in profit were, in order, digital cameras, LCD TVs and system LSI. Conversely, rear-projection TVs suffered a large decline in profit. This is because of price reductions caused by increased competition among large-sized flat-panel TVs, as well as a decrease in sales volume, both of which occurred in the U.S. market, which is the primary market for this product.

Overall sales for the TV category for the quarter were approximately JPY425b; an increase of 15%. Operating income was approximately JPY13b; an improvement of approximately JPY17b year on year. Although rear-projection TVs currently face a tough business environment, LCD TVs have performed quite well and, thus, there is no change in our forecast for the entire category to be profitable in the second half of the fiscal year.

Overall sales of the Semiconductor category for the quarter were approximately JPY255b; an increase of 74% year on year. Operating income was about JPY13b; an improvement of approximately JPY13b year on year.

We expect to improve profitability this fiscal year and anticipate recording a smaller operating loss than last fiscal year's loss of JPY34b, with a production facility utilization ratio for PS3 semiconductors being higher than the ratio assumed in our October forecast.

Next, the Games segment. Sales increased 6% year on year or 3% on a local-currency basis. Approximately 70% of sales came from hardware and accessories and the balance from software. In hardware there was an increase in overall sales as a result of the launch of PS3.

PS2 penetration continued to expand and achieved cumulative [robust] unit shipments of more than 110m units. Although the PS2 business performed well in the year-end holiday sale season, PS2 sales decline has resulted in strategic price reductions.

As the PS2 business is seeing steady demand after New Year, we have upwardly revised our product shipment forecast from 11m units to 13m units. PSP sales declined due to a decrease in unit sales compared with the same quarter the previous fiscal year. As for PS3, we have shipped 2m consoles within two months of the U.S. and Japan launches in November. And we continue to target a production shipment of 6m units for the full fiscal year ended March 31.

PSP software sales increased due to further PSP platform penetration. However, overall software sales decreased as a result of lower PS2 software sales.

An operating loss of JPY54.2b was recorded, compared to the JPY67.8b of operating income recorded in the same quarter of the previous fiscal year. This deterioration was primarily the result of a loss arising from the sale of PS3 at strategic price points, as well as the recording of other charges in association with preparation for the launch of the PS3 platform.

In addition, while PS2 outperformed our expectations during the quarter, particularly in Europe and North America, operating income from the PS2 business declined year on year to decreased software productions -- due to decreased software production shipments. Operating income from the PSP business also declined due to lower PSP hardware sales.

In the Pictures segment, sales increased 46.8% compared to the same quarter the previous fiscal year, or 46% on a U.S. dollar basis. Sales increased primarily due to the significantly higher DVD revenues on films, led by the releases of Da Vinci Code, Talladega Nights and Click that were released in the first half of the fiscal year.

Theatrical revenues were also higher in the third quarter due to the box office performance of Casino Royale and the Pursuit of Happyness. Television revenues also increased, primarily from additional syndication sales of The King of Queens.

Operating income of JPY26.2b, or $220m, was recorded compared to an operating loss of JPY0.4b in the same quarter of the previous fiscal year.

Finally, Financial Services. Financial Service revenue decreased 9.2% compared with the same quarter of the previous fiscal year, mainly due to a decrease in revenue at Sony Life. Although revenue from insurance premiums increased at Sony Life, reflecting an increase in insurance in force, revenue at Sony Life decreased by 12% to JPY147.5b due to lower valuation gains in the general account and the separate account. This reflects the fact there was only modest increase in the Japanese stock market prices during the quarter compared to strong gains in the same quarter of the previous fiscal year.

Operating income decreased by 46% to JPY25.5b due to a decrease in the operating income at Sony Life. This decline was due to the decrease in valuation gains from investments in the general account, including valuation gains from Convertible Bonds.

Before Mr. Yuhara and Mr. Wiesenthal take your questions, I'd like to summarize the key points discussed today. The strong recovery in our Electronics business continues. We achieved record results in Electronics this quarter, including doubling operating profit versus third quarter a year ago. Our TV business achieved profitability and we are on track to keep it profitable for the second half of the fiscal year.

In the Games segment, Q3 marked the launch of PS3. Our start-up costs are substantial and trending higher than initial forecasts. We remain very excited about the promise of PS3 over its life cycle.

The Pictures division continues its very strong year, setting box office records, generating higher profits and exploring new delivery platforms. The core Financial Services businesses continue to grow. However, their results are somewhat muted by the lower growth in the Japanese equity market.

And finally, our Joint Ventures continue to perform well, with record results at Sony Ericsson and aggressive cost control and restructuring in Sony BMG to combat the shrinking market.

We are very pleased with the results of the third quarter and we would now like to take your questions.

[OPERATOR INSTRUCTIONS]. And your first question will come from the line of Evan Wilson from Pacific Crest Securities. Please proceed.

Hi. Good morning. Thanks for taking the question. A couple of questions as relates to inventory. First, on the Electronics business, you said inventory was up 42.2% due primarily to LCD televisions and PS3 semiconductors. Can you give us any more detail on the breakdown between those two groups, how much it represents as a whole and whether or not each of those are trending well ahead of the forecasts from October?

Yes, Yuhara speaking. Yes, inventory was down by 42%. And, as you know, the semiconductor of PS3 was [drastically] down because the PS3 production just launched in third quarter. And also LCD TV sales we could achieve that -- achieve to [certainly planned] the quantity during third quarter and, therefore, this was also down to the reasonable levels. However, we have rear-projection TV which is the expectedly lower production sales. So, therefore, we have a lot of inventory but, overall, the inventory [so] is within control [if you like].

And then on the inventory levels of the Game business, you mentioned there is a significant inventory bump there as well. I'm wondering if you could break down what percentage of finished goods was a piece of that inventory, because you mentioned that 2m units shipped within the first month --two months, which indicated that you probably had some of those shipments after the quarter had closed. So I'm trying to get a quantification of what percentage that Game inventory has sold since sold through -- or sold through the channel.

Okay. I do not disclose the breakdown of inventory. But most of Games inventory is finished products. Then the PS3 itself is a very, very limited quantity numbers. And PSP, which the -- inventory was reduced towards the end of December, but we see the turnover of PSP is a little bit over than our expectations. And PS3 [sales], as we can see, we have a very strong demand from the market then the inventory level is adequate. So that is [our situation] in inventory of the Games segment.

Okay, thank you very much.

And your next question will come from the line of William Drewry from Credit Suisse. Please proceed.

Thank you. A question for Mr. Wiesenthal and one for Yuhara San as well. First off, for Mr. Wiesenthal, just wondering on the DVD pipeline how that's looking for 2007 -- for calendar 2007, and milestone films which you'd look for. Also any developments you can share on Blu-ray in terms of the DVD sell through?

And then, for Mr. Yuhara, I'm just wondering how the Blu-ray diode has -- the yields on that, if they have been improving. And any comments you can give us on PSP evolution, any new products for PSP in 2007 as well. Thank you.

Okay, Bill. In terms of DVDs, obviously, part of the strength that we enjoyed this quarter at Sony Pictures was a result of very strong DVD sales; the Da Vinci Code, Talladega nights, to name two very important DVDs. And with respect to upcoming DVDs, Open Season is hitting the stores right now and then, this March, Casino Royale will also be hitting DVD, along with Holiday and Rocky Balboa.

So we're going to really start enjoying the wind towards our backs in terms of a very strong DVD market for our films, given the strong box office we enjoyed, being number one in box office for the year. We had 13 films that opened to number one. And we ended up at the box office about 1.7b, with 18% market share. So that really bodes well for the coming year.

With respect to Blu-ray, again, a great way to look at Blu-ray in terms of the strength of the platform is to take a look at who's behind Blu-ray and what the new release schedule looks like for the past year in terms of box office performance.

If you look at the top 15 films for this past year, for 2006, 11 of those top 15 films were released by studios that have chosen only to release on Blu-ray. And those films represent about 80% of the box office of the top 15. And, in fact, each of the top five films for the past year, representing over 1.3b in box office, were released by studios that have chosen to release only in Blu-ray, those studios being Sony, Fox and Disney.

So if you take a look at the strength of the platform, you have to not only look at libraries, but also look at new releases. So we're very -- we're feeling very good about Blu-ray right now. But it is early days.

In Japan, about 96% of the hardware being sold for high-definition format are coming from the Blu-ray family. It's a format with over 100 different [CE] manufacturers being part of the association. And, obviously, we have the launch coming up in Europe for PlayStation 3. So we're feeling very good about that.

Now I'll let Mr. Yuhara answer the question about diodes.

Yes, on this for the [BD] diode, we have the big improvement of each, particularly, during the December period. Then this was, I would say, the good -- the good directions for this improvement. Then from January onwards, we have more confidence to achieve the 6m PS3 set during the fiscal years. So it's the good news.

Then, as the PlayStation Portable is concerned, you see this year we are going to plan to make 9m units. Then next year and -- it is too early to say, but we are considering that the mode to activate this PSP, such as developing the softwares and also it could be a new application on the PSPs. But when the time is come and we will directly announce those to the marketplace.

Excellent. Thank you.

Thank you.

And your next question will come from the line of Jason Mauricio of Arete. Please proceed.

Hi there, just a couple of questions. I'm wondering if you could discuss whether you're comfortable enough with the laser diode production that you can now start thinking about moving the cell chip from 90 nanometer to 65 and what level of cost reductions you could expect from that.

Finally, was there -- is there an appropriate channel inventory to think about for the PlayStation 3 and TVs -- and LCD TVs? What's the appropriate level and how might that move going into the next fiscal year?

And, maybe finally, can you clarify the comments from this morning regarding the Financial Services IPO and whether that could, indeed, come in FY07? Thank you.

Okay. I just talked about the laser diode production and that in order to reduce the production cost of the PS3 in terms of visual materials and we need to include -- use the diode further.

And also, as we indicated today, we already started the [various size] chipset with 65 nanometer production line. And that very size itself is a 40% reduction compared to the 90 nanometer production line. So, theoretically, it can reduce the cost with this [various] size. And also we are planning to reduce the number of parts of PS3, together with the new chipset. Then we'd like to see drastic cost reductions, particularly, for the PS3s towards the next fiscal years.

The inventory -- some of the inventory for PS3, at this moment, it's too early to say because currently we have very heavy the back orders on this. And so, therefore, it is too early to say at this stage. But on the LCD TVs and the channel inventories is, at most, eight weeks. So if the channel inventory is more than eight weeks then we are going to adjust the inventory to [the various dealers] of this. So that is our -- the standard for the inventory protocols.

Okay. Yes, I feel it is [unchanged] which will be scheduled in the fiscal year '07 onward. Okay?

Okay. Thank you very much, Mr. Yuhara.

And your next question will come from the line of Daniel Ernst from Hudson Square Research. Please proceed.

Yes. Good morning, a couple of questions if I might. First on the Games division, I just wanted to clarify the commentary from the call this morning in Tokyo. Did you imply that the forecasted loss in Game which, in October, was around a JPY200b loss for the Game division for the current fiscal year, that that might be a bigger loss than you had forecast in October?

And then, second and the related question, to what extent is your Game loss in the fourth quarter, still assuming recorded losses and components of things like [SAL] and Blu-ray that you have in production ahead of actual unit shipments? In other words your launch in Europe is March 23 and so you might have a tail-end of production before you're actually receiving revenues. Is there still a catch-up to come of units in production versus actual revenues and shipments that you're accruing for in the fourth quarter? Thanks.

Yes, you know the loss -- operating loss in the Game segment is just as we indicated today, in Tokyo. We have the figure of 100 [inaudible] the -- afterwards, the [proceeds] in every Sony segment, compared to the October forecast. Then this will be offset by this -- the loss in the Game segment. So therefore the Game segment loss will be increased from 200b to, say, 240b, so that is what we have forecasted for the moment.

Right, and to what extent does that 240, taking in you have components and units in production ahead of revenue, as you have been for the last couple of quarters where you're accruing expenses ahead of shipment?

Yes, that's right, and the end of March this year, we have the inventory of key devices such as the semiconductor or Blue-ray, and also finished products, which are supposed to be the [negative], the margin for this. Therefore, we accrued those into the -- toward the end of March. So this amount is also included in the [loss buffer] for this year.

Okay, that makes sense. And then just a last question. The forecast for the -- the revised forecast for the fiscal year, for the corporate-wide, also includes an assumption that you had some appreciation of the yen, I think, 217 to the dollar, and I think was it 156 to the -- or was it 153, to the euro? What is that impact? In other words, if you don't have that yen appreciation, what is that delta in your forecast?

Yes, the [first] quarter, the yen -- the exchange rate is 117 to the dollar, and 153 yen to euro. Currently the yen was a lot depreciated to the level. So, theoretically, there is the favorable -- the yen benefit such as something like 100 to 70 [inaudible] for the [fourth] quarter only. This is a theoretical only benefit from this yen depreciation, which is not included in this forecast.

I'm sorry, could you repeat that number, the theoretical number?

[17b].

17b? Okay.

Yes, 1, 7 billion yen. That is a theoretical benefit from the yen depreciation.

Understood. Okay, thank you.

And your next question will come from the line of Ben Atkinson of Gagnon Securities. Please proceed.

Thank you. First, could you talk about returns to date under the battery recall, and how that's tracking versus your expectations, and also what effect, if any, are you seeing on future orders for the battery business as a result of the recalls?

And second, could you talk about how you are combating the trend of game developers shifting some of their resources towards Wii or X-box 60 and away from PlayStation 3? At least that's the impression I get from reading comments from some of your development partners. How are you going to go about trying to reverse that? Thank you.

Yes, the when we have the provision and the [inaudible], the [inaudible], [displacement] program for this [inaudible] battery, and we anticipated the return base is about just over 50%. And then the major [upfall] for the [bill] and also Toshiba in Japan, and they are [return bases] [inaudible] the [plant] at the beginning. So then that more so them would be achieved, this return rate, by the end of January. So that's a point.

And the other thing is, at this moment, and those customers who do not change the older type of battery for this existing PC, but in the future this is very hard to tell what's going on, because most of the company have the [double] resources of those batteries, but we hope they would to continue to the -- place orders of batteries to Sony [ideally]. And, --

Yes, it's Rob Wiesenthal. With respect to the comment about game developers shifting resources from PS3 to Wii and 360, obviously, the PlayStation 3 is a very powerful platform. All these platforms are -- new platforms are like learning foreign languages. It takes time. We're really on the first generation of games.

We're constantly working on enhancing our toolsets and making these toolsets easier for developers to make powerful software. And I think that as the development community gets comfortable with these toolsets, and sees the power of the platform, and all of the capabilities of the cell processor, and the public really sees the capability, really starting with that second generation of games, I really think that the pace is really going to continue in terms of the development.

This is obviously a process that is still unfolding. It's going to take time. It's early days, and I think you will be really pleasantly surprised when you see the second generation of games. And I think that the response that we're getting from the development community is that the toolsets are in fact improving. And they're getting much easier for them to use and the development community is getting there in terms of learning how to take advantage of the platforms. So give it time, and we'll see how it goes.

Rob, could you say when, roughly, we should start seeing some of the second generation games and that wow factor?

I think you're starting to see more games that take advantage of [10ATP]. You're starting to see more games that take advantage of online capabilities. I don't know if you know this but, in our first month of Playstation 3, not only did we have 500,000 users signed up for the PlayStation Online, but over 350,000 people downloaded Gran Turismo HD, an incredible game, and a wonderful turnout from the PlayStation 3 community. So I think it's starting to happen already, but it's going to take time.

Thank you.

And your next question will come from the line of Luc Mouzon from BNP Paribas. Please proceed.

Yes, hi, good afternoon. Just a question regarding the situation in Europe. It sounds to me that your performance over the quarter has been pretty strong, especially on the BRAVIA LCD line and on digital camera. Could you comment about potential market gain -- market share gain right here?

And regarding inventories, and the [long-size] inventories, by which I mean inventories in the channel, do you think that there will be some clean-up going forward, especially for the European market, or do you assume that the inventory level in the channels are normal at this stage?

Yes, thank you very much for this, and we had a very good start to the quarter. As you said, particularly on LCD TV business and also the [digital] cameras. So if I just focus on the European market of LCD TVs, first, we did have the record of sales of the TV business in Europe, and the market here, the latest was -- it's around 16%. That is the almost second place in the European market, next to Samsung.

Digital camera itself, we have good sales, particularly in Europe. Europe, as you know, is the biggest market, and then we have good sales of the S and the W series in the marketplace. Then as you know, the result of this, particularly the contribution in Europe, and we could increase our year-end forecast from 15.5m to 17m as the market increases. So it's the European market, particularly during holiday period is very good, okay?

And your next question will come from the line of Jessica Reif Cohen of Merrill Lynch. Please proceed.

Thank you. I had just a couple of questions on the Music side of the business. The Company has benefited from a legal settlement. Could you give us the size of that, and was that Kazaa?

And then just some other general questions about Music. The margins were up a lot. Is there room for further improvement there? And what's the timeframe to get to the European regulatory issues?

Hi Jessica, it's Rob. How are you?

Fine.

Alright. I think it's really difficult to -- obviously to take a look at just one quarter. The Music business is still a challenge for us. There has been a fair amount of restructuring, as you know, and we're going to continue with restructuring. We're not releasing the amount of the legal settlement, but Kazaa was definitely the majority of it. And with respect to the Sony BMG regulatory issue that we're going through right now, it's -- the legal process is proceeding as we would hope.

Obviously, we'd hope this thing would move further along in this time, but really, all I can really say right now is that we're going through the process and we're comfortable there's going to be a resolution where things will continue with the merger as originally formed. But we'll keep you posted on it, but we're really not giving any sense of timing at this point.

And can I -- thanks, Rob. Can I just follow up with some -- a couple of questions on the film side? Do you have any TV syndication? Do you have anything coming to syndication in the next year? And how many films, as you look out to calendar '07, what is the number of films for '07 versus '06?

Let's talk about on the tele-business, the Television side. We had five network series picked up this season; Kidnapped and Runaway, which were critically acclaimed, are not on the air at present. We have two comedies that are doing well; Till Death, which received an order for additional episodes, and Big Day. Additionally, we have a couple of cable shows that performed well that we received additional orders for.

With respect to, call it calendar '07, the films that we have coming up, we just had Cash on Release, Messengers in February, with [Dylan McDermott], and obviously our big film in February is Ghost Rider, with Nic Cage, and Eva Mendes. We have Reign Over Me with Adam Sandler, and Premonition with Sandra Bullock. And in the pipeline, obviously, we have Spiderman 3 in the fiscal year. So I would say next -- this coming fiscal year is lighter in terms of box office, but it is our Spiderman 3 year, and we're very optimistic about the performance of the division as a whole.

Thank you.

And in terms of syndication, we have additional seasons of King of Queens and, obviously, Seinfeld continues to be in syndication as well.

And your next question will come from the line of Michael Bertz of Kennedy Capital. Please proceed.

Good morning gentlemen, or good evening. Just a couple of quick things, and I wanted to ask, some of them a little bit surprising. You mentioned in the rear-projection sales being a little bit less than expectations, so two things here. One, can you give us a sense of sales volume in terms of units, or [speed text] as inventory there, and then I'll have the follow up?

Okay, in this rear-projection TV, it is a main market in the United States, as you know. Then, as you can see, there was a big price reduction on this rear-projection [sales] and also the plasma TV in the same marketplace. And this was very much connected to the quantities, and also the price on this.

So that's the reason why rear-projection business was rather unexpected during the holiday season. And for this, in terms of quantity, we planned to make the 1.8m during the year, but now we change to 1.1m so -- which you can see that some big reduction for this [inaudible]. Therefore, because of the adjusted growth, the production is [ended] normal, [in other words], the inventory levels so far.

Okay, and then a follow up to that, on the profitability side. Presumably I would think that the LCD production in HTPS pricing got more competitive than the SXRD. Can you speak to if there was any offset from SXRD obviously being better than the HTPS?

And then as we think about the overall TV business, perhaps for modeling purposes, you can talk a little bit about relative profit margins between rear- projection, especially SXRD, and the LCD line?

Yes. The LCD TV performance was better than what we expected before the holiday season started. Then, as you can see, if you see that the average sales price of the LCD TV, which is the same as the Q3 in the last fiscal year, which is the [most] of the SXRD and also LCD projectors [inaudible]. [Pushed] level of LCD is not disclosed but, obviously, we have reasonable [pushed] percentage of LCD, you know, the TVs, for the Christmas holiday season.

Just one point of clarification, it's Rob Wiesenthal again. With respect to Jessica's question about Sony BMG, I think we believe that we would have expected here a decision in the second half of 2007, just to provide you with a little bit more visibility, and that's calendar 2007, I'm talking about.

Listen, operator, we'd like to take one last call please.

Thank you. Your last question will come from the line of Evan Wilson of Pacific Crest Securities. Please proceed.

Hi, one more on the pricing of the PS3 and just your pricing decisions versus the consoles in general. With the PS2 launch you didn't cut the price for 18 months but, traditionally, we've seen a price reduction on your consoles, about once a year. How are you feeling about the price point on the PS3 at this point? There's been lots of speculation. What's the likelihood that we see a price cut in the first year of a PS3 launch?

Yes, it's very difficult to compare PS2 and PS3 now but, as you know, when we launched PS2 in the United States, you have [killer] content like Grand Auto Theft, and then that the -- just the -- our customers just kept buying this PS3 without any -- the price issues. So this PS3 -- and we would like to maintain the current price.

As you know, the pricing itself is a quite [specific] issue and once we make a price adjustment, we would like to activate those -- the PS3 market, or the very [eventful], the software will come out to make the demand boost in the marketplace. So those -- we would like to see that [there are no] pricing issues. Otherwise, at this moment, it's very difficult to answer for this pricing of PS3.

Got you, thanks.

Thank you, Mr. Yuhara, Mr. Wiesenthal. Before I conclude tonight's conference call, I'd like to take this opportunity to remind everyone of our IR contact information.

In Tokyo, Investor Relations may be reached at 813 5448 2180. In New York, Justin, Mickey and myself can be reached at 212 833 6722, and in London, [Jinji Tometa] is available at 44 207 444 9713. Again, thank you all very much for joining us. This concludes today's call.

Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude today's presentation, and you may disconnect your lines. Everybody, have a wonderful day.