Sony MPK-THC O-ring Maintenance Manual page 85

FORECAST OF CONSOLIDATED RESULTS
Factors which may affect Sony's financial per-
formance include the following: market condi-
tions, including general economic conditions,
in major areas where Sony conducts its busi-
nesses, levels of consumer spending, foreign
exchange fluctuations, Sony's ability to con-
tinue to design, develop, manufacture, sell,
and win acceptance of its products and ser-
vices, Sony's ability to continue to implement
personnel reduction and other business reor-
ganization initiatives, Sony's ability to imple-
ment its network strategy, and implement
successful sales and distribution strategies in
the light of the Internet and other technologi-
cal developments, Sony's ability to devote suf-
ficient resources to research and development,
and capital expenditures, and the success of
Sony's joint ventures and alliances. Risks and
uncertainties also include the impact of any
future events with material unforeseen impacts.
Refer also to the "Cautionary Statement".
Regarding the forecast of consolidated
results for the fiscal year ending March 31,
2005, sales and operating revenue is expected
to increase slightly compared with the fiscal
year ended March 31, 2004. Operating in-
come, income before income taxes, and net
income are also expected to increase. This
forecast assumes that the yen for the fiscal
year ending March 31, 2005 will strengthen
against the U.S. dollar and the euro compared
with the fiscal year ended March 31, 2004.
During the fiscal year ending March 31,
2005, primarily in the Electronics segment,
restructuring charges of approximately 130
billion yen are expected to be incurred across
the Sony Group. 168.1 billion yen in restruc-
turing charges were recorded in the fiscal year
ended March 31, 2004.
In April 2004, a settlement was reached in
a lawsuit between InterTrust, an equity affiliate
of Sony, and Microsoft regarding patents held
by InterTrust. In return for the provision of a
license to Microsoft, InterTrust received 440
million U.S. dollars. As a result of this settle-
ment, Sony expects to record approximately
100 million U.S. dollars in equity in net income
of InterTrust during the fiscal year.
ELECTRONICS
Sales of products such as digital still cameras,
flat panel televisions and DVD recorders are
expected to continue to increase, resulting in an
anticipated increase in overall sales of the seg-
ment, despite an expected decrease in sales of
CRT televisions. Operating income is expected
to increase due to the increase in sales and the
benefit of restructuring activities undertaken in
the previous fiscal year, despite an anticipated
appreciation of the yen and an expected in-
crease in research and development costs.
From the fiscal year ending March 31,
2005, research and development costs associ-
ated with process technologies, including
those technologies used in the Game segment,
which were previously recorded in the Game
segment, will be recorded in the Electronics
segment, due to the integration of the semi-
conductor businesses in the Electronics and
Game segments.
GAME
Although software production shipments are
expected to remain unchanged year on year,
production shipments of PS one and
PlayStation 2 hardware are expected to de-
crease compared with the previous year, re-
sulting in a decrease in sales for the segment.
Although a portion of research and develop-
ment costs will be recorded in the Electronics
segment, as described above and in "Research
and Development" below, operating income is
expected to decrease due to continued invest-
ment in products such as the PSP handheld
entertainment system and the next generation
computer entertainment system.
MUSIC
Sales are expected to decrease due to an an-
ticipated continued contraction of the market
for music and a reduction in the unit price of
DVDs in the manufacturing division. However,
due to factors such as the benefits of restruc-
turing activities already carried out, operating
income is expected to increase.
PICTURES
Sales are expected to decrease due to the ab-
sence of the significant television revenues in
the fiscal year ended March 31, 2004. How-
ever, operating income is expected to remain
unchanged primarily due to the contribution of
films scheduled for release during the year,
most notably Spider-Man 2.
FINANCIAL SERVICES
Although an increase in insurance-in-force is
expected at Sony Life, a decrease in insurance
revenue is expected due to a change, at Sony
Life, in the recognition method of insurance
premiums received on certain products from
being recorded as revenue to being offset
against the related provision for future insur-
ance policy benefits. A decrease in operating
income is also expected because valuation
gains from marketable securities are not in-
cluded in the forecast.
CAPITAL EXPENDITURES
In the fiscal year ending March 31, 2005,
capital expenditures (additions to fixed assets)
are expected to be 410 billion yen, an increase
of 8 percent compared with the previous year.
More than 90 percent of the amount is ex-
pected to be spent in the Electronics and Game
segments. Of this amount, capital expenditures
on semiconductors (in the Electronics and
Game segments) during the fiscal year are
expected to amount to 190 billion yen (actual
amount in the fiscal year ended March 31,
2004 was 175 billion yen). Of the capital ex-
penditures on semiconductors, 120 billion yen
is expected to be spent for the installation of
semiconductor production equipment de-
signed for next generation broadband micro-
processors (actual amount in the fiscal year
ended March 31, 2004 was 69 billion yen). For
an explanation regarding fund procurement,
refer to "Capital Resources" above.
DEPRECIATION AND AMORTIZATION
In the fiscal year ending March 31, 2005,
expenses for depreciation and amortization,
which includes the amortization of intangible
assets and the amortization of deferred insur-
ance acquisition costs, are expected to be 370
billion yen, an increase of 1 percent compared
with the previous year. Although expenses for
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