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Sony Corp. said Thursday its group net profit fell 25.3 percent in the second quarter to 32.92 billion yen due to large research and development costs in its game division.

Group revenue for the July-September period edged up 0.4 percent to 1.8 trillion yen.

The consumer electronics giant, which has been suffering lackluster performance, said there were signs of a pickup in its electronics business, which accounts for more than two-thirds of the group’s total revenue.

During the period, the electronics division’s operating profit grew 36.2 percent to 35.8 billion yen, while the division’s sales slipped 1.4 percent to 1.21 trillion yen.

The firm said that semiconductors, including charge-coupled devices for digital cameras, Vaio PCs and DVD recordable drives, drove up profit, while cathode-ray tube TVs and Clie personal digital assistants suffered during the three-month period.

The firm’s game unit saw operating profit plunge more than 90 percent to 2.2 billion yen due to declining sales of PlayStation and PlayStation2 consoles and game software in Japan and overseas.

The company said the decline is partly attributable to a rebound from the increased demand seen last year, when PlayStation2 consoles were marked down and local dealers decided to hoard their merchandise in the lead up to a strike by dock workers on the U.S. West Coast.

Sony said the game unit’s profit was hurt by major research and development spending.

Takao Yuhara, Sony’s chief financial officer, said the firm will increase the division’s R&D budget by 50 percent to 90 billion yen for the full year through March 31 to develop semiconductor devices used for “the next-generation platform” and the PSP hand-held game console.

The movie unit logged an operating loss of 4.6 billion yen during the period, compared with a 9.9 billion yen profit the previous year.

The company blamed the absence of blockbusters such as “Men in Black II” and “Spider-Man.” “Gigli,” released in summer, flopped.

Sony’s financial arm and Sony Ericsson Mobile Communications AB contributed to the profits during the period.

Market attention is currently focused on the company’s management plan announcement, scheduled for Tuesday. The firm is expected to unveil restructuring measures, including the reduction of its worldwide workforce by 20,000, according to some media reports.

Analysts said that Sony’s past successes with CRT TVs and VCRs have weighed it down as the market shifts to digital products.

Sony trails rivals such as Sharp Corp. in flat-panel TVs, while lagging behind Matsushita Electric Industrial Co. in DVD recorders.

To catch up with competitors, Sony will release a range of flat-screen TVs on the domestic market in time for the yearend shopping season. It is also scheduled to release its PSX game console-cum-DVD recorder around the same time.

Sony officials said these and other strategic digital products, including digital cameras, camcorders and Vaio PCs, will boost sales in the remainder of the fiscal year.

Sony eyes holding firm

Sony Corp. plans to establish a financial holding company supervising the group’s three financial firms by April, officials said Thursday.

The officials said Sony will provide details of the plan at a board meeting Tuesday. The three firms are Sony Life Insurance Co., Sony Assurance Inc. and Sony Bank.

The move is intended to enable the three firms to offer customers a comprehensive lineup of financial products, increase their creditworthiness and improve efficiency in the use of assets.

Sony is reportedly considering listing the holding company. If realized, it would be the first time that a nonfinancial company in Japan has established a financial holding firm. It would also be the first cross-industry consolidation of banking and insurance entities.

Sony established the predecessor of Sony Life Insurance in 1981 and the nonlife insurer, Sony Assurance, in 1999. Sony Bank was set up in 2001.

The three firms employ a total of about 6,000 people.

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