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SI: Interesting Q&A From Sony’s Q2 FY09 Conference Call – New TV’s In February, And Other Tidbits

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There was some real interesting quotes Sony put out there during its Q2 FY09 Conference call, including the admission that its TV segment will struggle to be profitable for the rest of the Japanese fiscal year, that we will see new TV’s from Sony by February, the power of the Michael Jackson effect on entertainment sales, and more. We’ve chosen the most interesting conversations for your enjoyment.

South Korea LED TVs

On bringing new LED backlit LCD’s to mass production as soon as possible to compete with Samsung and the rest:

Evan Wilson – Pacific Crest
: You mentioned in Japan earlier today, that there is the potential to bring some TV models that you had planned to launch next year into this year. Could you discuss that strategy and what do you think the impact would be on profitability and pricing in the TV business?

Sam Levenson
: Well, the impact on the profitability is very difficult to tell you exactly how much we’re going to save. But the main reason the why that we have to introduce the new model which originally, we anticipated to introduce in the spring time next year, was that our competitors particularly like Samsung, their product feature is unfortunately superior than ours. Particularly in the LED, satellite features. They planned that technology not only with top end model, but also the mass production models too. Of course, we have the LED-backlit model in our product line, but that was only for the top line items.

So therefore, our lineup was not so strongly enough compared to the Samsung. So, our strategy is to introduce the new models, the spring models as soon as possible, probably sometime as in February this year. By doing this, yes, that we have to invest some of the additional promotional expenses for the current model, that is a negative factor, but by introducing the new competitive model, other than planned, that will generates some profit. So, overall we’ll generate some profits for us in this sense.

SONY/

Finding out if there will be a break-even or profits for Sony with their TV’s:

Daniel Ernst – Hudson Square Research
: And for the second half you expect to either become break even or create profits in TV?

Nobuyuki Oneda
: Well, TV will not to be a breakeven this year unfortunately. I mean the sales volume would be same as the forecasted level. But profitability wise it’s enough to breakeven, still we’ll be the raw situations unfortunately.

Thoughts on outsource manufacturing and further thoughts on restoring TV profitability:

Mark Harding – Maxim Group
: If you could share your thoughts and have some targets on outsource manufacturing? And then secondly there was I guess a comment during the earlier calls regarding to moving towards profitability on the television side requiring you to look beyond the hardware. If you could just provide a little bit more color around that as well, it would be great?

Nobuyuki Oneda
: Yes, currently under the digital era a little gradually difficult to make a differentiation for the television businesses. So, therefore and also the assembly areas, the final assembly areas, there is a less, the profit is expected in this area. So therefore the we would do still the engineering or the design side or see our final assembly areas, we will try to increase the percentage of the assembly to the outside EMS in operations.

Robert Wiesenthal
: On the second question, it’s Robert Wiesenthal speaking. Nick mentioned in our meeting today about beyond hardware. And what he was referring to was about the use of visual services on our television set. Right now, as you know, we have the PlayStation network; the PS3 and PSP go that is migrating to the television, the Bravia, over time. Right now there are already is a service in place called the Bravia internet links that allows people to watch television shows and content from various networks. Last year, we were the first company ever to show a film directly to television owners outside cable and satellite and we have more plans in the future. So that’s really what refers to is that service stream which will generate revenues beyond the threshold of the retail store and that is something that is just beginning with IPTV and I think you will see a lot more to coming months.

Speaking about PSP sales..

Evan Wilson – Pacific Crest
: So, far in the first half of this fiscal year, shipments of PSP are tracking down about 2.6 million versus the first half of last year. What gives you confidence that in you reiterated forecast to sell one more million PSPs this year than you did last year?

Nobuyuki Oneda
: Some of the areas that we already introduced the PSP go, which is the new model. For some areas that we’re going to introduce in next month, right? The will increase hopefully over hardware numbers for the PSP and also at the same time, the big software program will be introduced like Gran Turismo during the coming holiday season. So that will hopefully putting the numbers over the software and hardware at the same time. So therefore at this moment we are behind compared to the original plan but we are not so pessimistic to achieve the original project.

Robert Wiesenthal
: On the PSP go, we have also started as you know the networks services on only say Wi-Fi device. So there is no physical media. We have just started porting over many of the movies and television shows associated with that. That takes some time to build up and if that library expands and improves I think you are going to see a very strong take up rate for not only the device but also the revenues associated with this service.

Hkg2753414

Factoring the split of the PSPgo and regular PSP, and how download only will effect margins..

Jed Latkin – ING: Since we have the launch for the PSPgo in October, have you guys factored in like what sort of split have you factored in between the 3000 and in the PSPgo? And given the significantly higher ASP and underlying margin how is that going to affect the margins in the games business? And is that higher ASP offset enough to mitigate the losses on the lower price PS3?

Unidentified Company Representative: Hi this is Mark (inaudible) our visiting CFO speaking. On the PSP

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