Sony stung by Playstation 2 delays

TOKYO, Japan - Consumer electronics giant Sony is counting the cost of production delays of its PlayStation 2 game console amid warnings of a fall in third-quarter profits.

The company's December quarter profit is expected to be between Y120 billion and Y140 billion, or as much as 27 per cent lower than the previous third-quarter profit of Y164 billion.

But analysts say the falling yen should bolster its earnings in the fourth-quarter, since Sony's exports will be cheaper for offshore customers.

Meanwhile, the company has also moved to expand beyond hardware sales with the purchase of two software development companies in the United States on Monday.

The anticipated revenues for the third-quarter would leave Sony, the world's second largest consumer electronics maker, on track to achieve a full-year net profit of Y10 billion, a dramatic slump from the previous year's Y122 billion result.

Stock slides

Expectations for the fall in profits saw Sony Corp. shares fall Y120 on the Tokyo Stock Exchange to Y8750 by mid-afternoon, a slide of 1.35 percent.

The company has been plagued in the past year by a slump in demand for electronics goods amid slowing global economic growth, and by protracted delays to the release of its much-anticipated PlayStation 2 games console.

Sony says the production problems have been ironed out, but the company failed to capitalize on the Christmas rush and faces increased competition from the looming release by Microsoft of its rival Xbox games console.

In a busy day for Sony's offshoot Sony Computer Entertainment, the unit acquired game developers Red Zone Interactive and Naughty Dog. Details of the acquisitions were not disclosed.

Sega speculation

The company also sparked an 18 per cent rise in the value of key rival Sega Corp. on speculation the struggling computer entertainment giant might soon supply games for the PlayStation 2.

Sega, the world's third largest video game producer and creator of the rival Dreamcast console, has been suffering from the immense popularity of rival products.

Its stock has been languishing, and late last year Sega executives warned of a likely fourth consecutive annual loss. No comment was made on the Sony deal rumors.

A Sega representative told CNN.com there would be no comment on the speculation, and there were no plans for a press conference.

Sony said the two games developers it acquired would be completely folded into its existing operations, with Red Zone to provide sports games and Naughty Dog to continue its successful series of Crash Bandicoot games.

External producers

Among major video-game hardware manufacturers, Sony has been the most reliant on third-party developers for the PlayStation and PlayStation 2 consoles. Sony has released just a handful of games under its own name.

Only one of the titles -- puzzle game "Fantavision" -- available when the PlayStation 2 launched last year came from Sony.

The two new divisions will report to product development vice president Shuhei Yoshida, who said: "Throughout the course of the year, we have expanded our internal development efforts considerably."

Reuters contributed to this report.

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