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The past several months haven't been kind to the electronics industry. Most manufacturers are suffering from slow sales and backlogged inventory. But one company is painting a slightly different, if confusing, picture. Unless you've drastically slashed margins while quadrupling sales volume, the phrase "record quarterly sales but decreased profits" appears self-contradictory. Yet Sony Corporation is claiming exactly that for the last quarter of 2001, the company's third fiscal quarter. (Most electronics manufacturers begin new fiscal years April 1.) On Friday, January 25, Sony announced a 14.4% decline in overall profits for the final three months of 2001, due to sagging demand for consumer electronics products. The company reported that sales of electronics decreased 2.8% to ¥1.55 trillion, with operating income for its electronics unit down a stunning 47% to ¥71 billion. The same announcement claimed an all-time quarterly sales record for Sony Corporation as a whole.

An accurate statement or Enron-style accounting legerdemain? Probably the former—mostly—since, unlike most other electronics giants, Sony is diversified. The company continues to enjoy brisk demand for its PlayStation 2 game consoles, with quarterly sales up 62.9%, for a total of ¥383 billion. Sony's video game business lost money in 2000, but in 2001 cost-cutting measures added approximately ¥66.4 billion to the bottom line. In case you were wondering what the next generation of technophiles does for fun, bear in mind that Sony shipped 52.7 million PlayStation 2 games during the quarter, more than three times the 16.9 million shipped in same period a year ago. To date, Sony has shipped 125.2 million units of software games for the PlayStation 2. The hot video game market has obviously helped offset the slumping electronics business.

Sony also claimed a profitable autumn for its music and movie divisions. The quarterly report states a 10.5% rise in music sales (total ¥209 billion) and a 13.2% increase in music business operating income. Recent hits for Sony Music include Anastacia's Freak of Nature and Michael Jackson's Invincible. Sony Pictures Entertainment registered a 12.2% sales increase (total ¥158.5 billion) even though some of its new films, such as America's Sweethearts and Riding in Cars With Boys suffered from unimpressive ticket sales. The movie division posted an increase in operating income of ¥300 million. In the third quarter of last year, it posted an operating loss of ¥2.4 billion.

Sony Corporation also operates financial services, such as banking and insurance. The company's financial wing reported a sales increase of 6.6% (total ¥127 billion) but its profits declined 65% to ¥2.1 billion, due to one-time startup costs for an "Internet Bank" and low returns on life insurance investments.

The Associated Press reported Sony Corporation's overall net income as $475 million (¥54.6 billion) for the quarter, compared to $556.7 million (¥64 billion) for the same period last year. Total sales for all divisions were reported at ¥2.29 trillion, a 7.4% rise from ¥2.13 trillion yen in 2000. Understandably, Sony execs put a happy emphasis on achieving record revenues, while they downplayed declining profits.