Quarterly Securities Report

For the three months ended September 30, 2008

 

(TRANSLATION)

 

 

Sony Corporation

 

 

 

 

 

 

 

 

 

 

CONTENTS

 

 

 

 

 

Note for readers of this English translation: On November 14, 2008, Sony Corporation (the “Company”) filed its Japanese-language Quarterly Securities Report (Shihanki Houkokusho) for the three months ended September 30, 2008 with the Kanto Financial Bureau in Japan (the “Report”) pursuant to the Financial Instruments and Exchange Act of Japan. This document is an English translation of the Report in its entirety, except for (i) information which had been previously submitted to the U.S. Securities and Exchange Commission in a Form 20-F, Form 6-K and any other forms and (ii) a description of differences between generally accepted accounting principles in the U.S. (“U.S. GAAP”) and generally accepted accounting principles in Japan (“J-GAAP”) which are required to be described in the Quarterly Securities Report under the Financial Instruments and Exchange Act of Japan if the Company prepares its financial statements in conformity with accounting principles other than J-GAAP.   Cautionary Statement Statements made in this translation with respect to Sony’s (as defined below) current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “may” or “might” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions and beliefs in light of the information currently available to it. Sony cautions you that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. You also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to (i) the global economic environment in which Sony operates, as well as the economic conditions in Sony’s markets, particularly levels of consumer spending as well as the recent worldwide crisis in the financial markets and housing sectors; (ii) exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales or in which Sony’s assets and liabilities are denominated; (iii) Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including newly introduced platforms within the Game segment, which are offered in highly competitive markets characterized by continual new product introductions, rapid development in technology and subjective and changing consumer preferences (particularly in the Electronics, Game and Pictures segments, and the music business); (iv) Sony’s ability and timing to recoup large-scale investments required for technology development and increasing production capacity; (v) Sony’s ability to implement successfully business reorganization activities in its Electronics segment; (vi) Sony’s ability to implement successfully its network strategy for its Electronics, Game and Pictures segments, and All Other, including the music business, and to develop and implement successful sales and distribution strategies in its Pictures segment and the music business in light of the Internet and other technological developments; (vii) Sony’s continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to correctly prioritize investments (particularly in the Electronics segment); (viii) Sony’s ability to maintain product quality (particularly in the Electronics and Game segments); (ix) the success of Sony’s joint ventures and alliances; (x) the outcome of pending legal and/or regulatory proceedings; (xi) shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment; and (xii) the impact of unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the Financial Services segment. Risks and uncertainties also include the impact of any future events with material adverse impacts.

 

Notes:

 

(2) Business Overview

There was no significant change in the business of the Company and its consolidated subsidiaries (collectively “Sony”) during the three months ended September 30, 2008.

As of September 30, 2008, the Company had 1,069 subsidiaries and 78 affiliated companies, among which 1,029 companies are consolidated subsidiaries (including variable interest entities) of the Company. It has applied the equity accounting method for 71 affiliated companies.

 

(3) Changes in Subsidiaries and Affiliated Companies

There was no significant change in subsidiaries and affiliated companies during the three months ended September 30, 2008.

 

(4) Number of Employees

The following table shows the number of employees as of September 30, 2008.

* Figures less than one hundred are rounded to the nearest unit.

 

 

Note for readers of this English translation: The description of the Electronics segment results in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” referred to the above item II.(1) is the same as described in the “Operating Performance Highlights by Business Segment” in the press release titled “Consolidated Financial Results for the Second Quarter Ended September 30, 2008” submitted to the SEC under Form 6-K on October 29, 2008. URL: The press release titled “Consolidated Financial Results for the Second Quarter Ended September 30, 2008” http://www.sec.gov/Archives/edgar/data/313838/000115752308008486/a5813878.htm

(2) Material Contracts

There was no execution of material contracts during the three months ended September 30, 2008.

Note for readers of this English translation: The above means that there is no update from the description in the Securities Report (Yukashoken Houkokusho) and the Company’s Annual Report on Form 20-F (“Patents and Licenses” in item 4) for the fiscal year ended March 31, 2008, as well as the Quarterly Securities Report (Shihanki Houkokusho) for the three months ended June 30, 2008.

 

(3) Management’s Discussion and Analysis of Financial Condition and Results of Operations

i) Results of Operation

Note for readers of this English translation: Except for information specifically described in this English translation, the translation of the description set out in the Japanese-language Quarterly Securities Report is omitted in this document, since it is the same as described in the press release previously submitted to the SEC. Please refer to “Consolidated Financial Results for the Second Quarter Ended September 30, 2008” submitted to the SEC on Form 6-K on October 29, 2008.   URL: The press release titled “Consolidated Financial Results for the Second Quarter Ended September 30, 2008” http://www.sec.gov/Archives/edgar/data/313838/000115752308008486/a5813878.htm

 

Foreign Exchange Fluctuations and Risk Hedging

There was no significant change during the three months ended September 30, 2008.

 

Note for readers of this English translation: The above means that there was no significant change from the description in the Annual Report on Form 20-F filed with the SEC on June 23, 2008.   URL: The Form 20-F filed with the SEC on June 23, 2008 http://www.sec.gov/Archives/edgar/data/313838/000114554908001104/k01608e20vf.htm

 

 

 

Status of Cash Flow

Operating Activities: During the three months ended September 30, 2008, there was a net cash inflow of 72.9 billion yen in operating activities, an increase of 48.0 billion yen, or 192.5 percent year-on-year. For all segments excluding the Financial Services segment, 4.9 billion yen of net cash was provided in operating activities, a decrease of 0.4 billion yen, or 7.9 percent year-on-year. The Financial Services segment had a net cash inflow of 67.9 billion yen from operating activities, an increase of 42.4 billion yen, or 165.7 percent year-on-year.

During the three months ended September 30, 2008, with respect to all segments excluding the Financial Services segment, the major inflow factors included an increase in notes and accounts payable, trade and a cash contribution from net income, after taking into account depreciation and amortization. This exceeded cash outflow, which included an increase in inventory within the Electronics and Game segments. The Financial Services segment generated net cash mainly from an increase in revenue from insurance premiums reflecting a steady increase in insurance-in-force at Sony Life.

Compared with the same period of the previous fiscal year, within all segments excluding the Financial Services segment, although there was a significant decrease in cash outflow from notes and accounts receivable, trade, net cash inflow decreased slightly mainly as a result of an increase in inventory within the Electronics and Game segments. Within the Financial Services segment, net cash generated increased year-on-year mainly due to an increase in revenue from insurance premiums reflecting a steady increase in insurance-in-force at Sony Life.

Investing Activities: During the three months ended September 30, 2008, Sony used 273.8 billion yen of net cash in investing activities, an increase of 124.8 billion yen, or 83.7 percent year-on-year. For all segments excluding the Financial Services segment, 128.0 billion yen of net cash was used in investing activities, an increase of 84.4 billion yen, or 193.2 percent year-on-year. The Financial Services segment used 149.0 billion yen in net cash, a increase of 51.6 billion yen, or 53.0 percent year-on-year.

During the three months ended September 30, 2008, with respect to all segments excluding the Financial Services segment, there were payments for items such as purchases of manufacturing equipment in the Electronics segment. Within the Financial Services segment, payments for investments carried out at Sony Life, and payments for investments and advances carried out at Sony Bank, where operations are expanding, exceeded proceeds from the maturities and sales of marketable securities and collections of advances.

Compared with the same period of the previous fiscal year, net cash used in investing activities increased within all segments excluding the Financial Services segment, mainly due to the proceeds from the sale of a portion of Sony’s former headquarters site in the same period of the previous fiscal year. Within the Financial Services segment, net cash used in investing activities increased year-on-year mainly due to a decrease in proceeds from the maturities and sales of marketable securities and collections of advances, which were partially offset by a decrease in payments for investments, carried out at Sony Life.

In all segments excluding the Financial Services segment, net cash used by operating and investing activities combined was 123.1 billion yen compared to net cash used of 38.3 billion yen in the same period of the previous fiscal year.

Financing Activities: During the three months ended September 30, 2008, 122.9 billion yen of net cash was provided by financing activities, a decrease of 192.9 billion yen, or 61.1 percent year-on-year. For all segments excluding the Financial Services segment, there was a net cash inflow of 4.8 billion yen in financing activities, a decrease of 176.6 billion yen compared to a net cash inflow of 181.4 billion yen in the same period of the previous fiscal year. This was primarily due to an issuance of commercial paper in the same period of the previous fiscal year. There was no such issuance in the period of this fiscal year. In the Financial Services segment, as a result of an increase in policyholder accounts at Sony Life and an increase in deposits from customers at Sony Bank, financing activities generated 121.3 billion yen of net cash, an increase of 0.9 billion yen, or 0.7 percent year-on-year.

Total Cash and Cash Equivalents: Accounting for the above factors and the effect of fluctuations in the exchange rate, the total outstanding balance of cash and cash equivalents at September 30, 2008 was 700.9 billion yen, a decrease of 86.8 billion yen, or 11.0 percent compared with the balance as of June 30, 2008. This is an increase of 73.9 billion yen, or 11.8 percent compared with the balance as of September 30, 2007. The outstanding balance of cash and cash equivalents of all segments excluding the Financial Services segment, was 533.7 billion yen, a decrease of 127.1 billion yen, or 19.2 percent compared with the balance as of June 30, 2008. This is an increase of 78.5 billion yen, or 17.3 percent compared with the balance as of September 30, 2007. Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 167.3 billion yen, an increase of 40.2 billion yen, or 31.7 percent compared with the balance as of June 30, 2008. This is a decrease of 4.6 billion yen, or 2.7 percent compared with the balance as of September 30, 2007.

 

 

Information of Cash Flows Separating Out the Financial Services Segment (Unaudited)

The following charts show Sony’s unaudited cash flow information for all segments excluding the Financial Services segment and for the Financial Services segment alone. These separate condensed presentations are not required under U.S. GAAP, which is used in Sony’s consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony utilizes this information to analyze its results without Financial Services segment and believes that these presentations may be useful in understanding and analyzing Sony’s consolidated financial statements. Transactions between the Financial Services segment and all other segments excluding the Financial Services segment are eliminated in the consolidated figures shown below.

 

 

 

 

 

ii) Issues Facing Sony and Management’s Response to those Issues

There was no significant change during the three months ended September 30, 2008.

 

Note for readers of this English translation: The above means that there was no significant change from the description in the Annual Report on Form 20-F filed with the SEC on June 23, 2008.   URL: The Form 20-F filed with the SEC on June 23, 2008 http://www.sec.gov/Archives/edgar/data/313838/000114554908001104/k01608e20vf.htm

 

iii) Research and Development

Research and development costs for the three months ended September 30, 2008 increased 0.6 billion yen, or 0.5 percent, to 132.3 billion yen, compared with the same quarter of the previous fiscal year. The ratio of research and development costs to sales (excluding Financial Services segment revenue) decreased from 6.8 percent to 6.7 percent. The bulk of research and development costs were incurred in the Electronics and Game segments. Expenses in the Electronics segment increased 1.6 billion yen, or 1.4 percent, to 112.7 billion yen and expenses in the Game segment increased 0.4 billion yen, or 2.1 percent, to 19.4 billion yen. In the Electronics segment, approximately 67 percent of expenses were for the development of new product prototypes while the remaining 33 percent were for the development of mid- to long-term new technologies in such areas as next-generation displays, semiconductors and communications.

 

iv) Liquidity and Capital Resources

There was no significant change during the three months ended September 30, 2008.

 

Note for readers of this English translation: The above means that there was no significant change from the description in the Annual Report on Form 20-F filed with the SEC on June 23, 2008.   URL: The Form 20-F filed with the SEC on June 23, 2008 http://www.sec.gov/Archives/edgar/data/313838/000114554908001104/k01608e20vf.htm

 

 

 

 

III    Property, Plant and Equipment

(1) Major Property, Plant and Equipment

There was no significant change during the three months ended September 30, 2008.

 

(2) Plan for the Purchase and Retirement of Major Property, Plant and Equipment

During the three months ended September 30, 2008, there was no significant change in the purchase and retirement of property, plant and equipment from the plan at June 30, 2008. During the three months ended September 30, 2008, there was no significant new firm plan of the purchase and retirement of major property, plant and equipment.

 

 

 

 

 

 

 

IV   Company Information

(1) Information on the Company’s Shares

i) Total Number of Shares

1) Total Number of Shares

 

 

2) Number of Shares Issued

 

Notes:

 

ii) Stock Acquisition Rights

 

Note for readers of this English translation: The Japanese-language Quarterly Securities Report includes a summary of the main terms and conditions of the stock acquisitions rights, bonds with stock acquisition rights and convertible bonds listed below. A summary of such terms and conditions has previously been submitted to the Securities and Exchange Commission under Form 20-F, Form 6-K and Form S-8. There has been no change to such terms and conditions since the applicable date of such submissions, except a revision of the total outstanding number of SARs issued and number of outstanding shares to be issued or transferred, as provided in the schedule below.   URL: The list of documents previously submitted by the Company http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000313838&owner=include&count=40

 

Stock acquisition rights (outstanding as of September 30, 2008)

 

 

 

 

 

Bonds with stock acquisition rights (outstanding as of September 30, 2008)

 

 

 

 

 

Convertible bonds (outstanding as of September 30, 2008)

 

iii) Status of Rights Plan

 

Not applicable.

 

iv) Changes in the Number of Total Shares Issued and the Amount of Common Stock

 

Notes:

 

v) Status of Major Shareholders

(As of September 30, 2008)     

 

 

 

 

Notes:

 

 

vi) Status of Voting Rights

1) Shares Issued

(As of September 30, 2008)      

 

 

 

 

 

2) Treasury Stock

(As of September 30, 2008)    

Notes:

 

 

 

There were no changes in directors and corporate executive officers between the filing date of the Securities Report

(Yukashoken Houkokusho) for the fiscal year ended March 31, 2008 and the filing date of this Quarterly Securities Report (Shihanki Houkokusho) on November 14, 2008.

 

 

 

 

V Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(i) Consolidated Balance Sheets (Unaudited)

Sony Corporation and Consolidated Subsidiaries

(Continued on following page.)

 

Consolidated Balance Sheets (Unaudited)

 

The accompanying notes are an integral part of these statements.

 

(ii) Consolidated Statements of Income (Unaudited)

Sony Corporation and Consolidated Subsidiaries

 The accompanying notes are an integral part of these statements.

 

 

Consolidated Statements of Income (Unaudited)

Sony Corporation and Consolidated Subsidiaries

 

The accompanying notes are an integral part of these statements.

 

 

(iii) Consolidated Statement of Cash Flows (Unaudited)

Sony Corporation and Consolidated Subsidiaries

 

(Continued on following page.)

 

Consolidated Statement of Cash Flows (Unaudited)

 

The accompanying notes are an integral part of these statements.

 

 

 

Index to Notes to Consolidated Financial Statements

Sony Corporation and Consolidated Subsidiaries

 

 

 

 

Notes to Consolidated Financial Statements

Sony Corporation and Consolidated Subsidiaries

 

1. Summary of Significant Accounting Policies

Sony Corporation and its subsidiaries in Japan maintain their records and prepare their financial statements in accordance with accounting principles generally accepted in Japan while its foreign subsidiaries maintain their records and prepare their financial statements in conformity with accounting principles generally accepted in the countries of their domiciles. Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except for certain disclosures which have been omitted.

 

(1) Newly Adopted Accounting Pronouncements:

Fair Value Measurements -

In September 2006, the FASB issued FAS No. 157, “Fair Value Measurements”. FAS No. 157 establishes a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures about the use of fair value measurements. FAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. In February 2008, the FASB issued FASB Staff Positions (“FSP”) FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” and FSP FAS 157-2, “Effective Date of FASB Statement No. 157”. FSP FAS 157-1 removes certain leasing transactions from the scope of FAS No. 157. FSP FAS 157-2 partially delays the effective date of FAS No. 157 until April 1, 2009 for Sony for certain nonfinancial assets and liabilities. In October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset Is Not Active”. FSP FAS 157-3 clarifies the application of FAS No. 157 in a market that is not active. Sony adopted FAS No. 157 on April 1, 2008 with regards to financial assets and liabilities. The adoption of FAS No. 157 as it relates to financial assets and liabilities did not have a material impact on Sony’s consolidated results of operations and financial position. Sony is currently evaluating the impact for nonfinancial assets and liabilities. Descriptions required to be disclosed by FAS No. 157 are omitted.

 

Fair Value Option for Financial Assets and Financial Liabilities -

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. FAS No. 159 permits companies to choose to measure, on an instrument-by-instrument basis, various financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The fair value measurement election is irrevocable and subsequent changes in fair value must be recorded in earnings. Sony adopted FAS No. 159 on April 1, 2008. Sony did not elect the fair value option for any assets or liabilities, that were not previously carried at fair value. Accordingly, the adoption of FAS No. 159 had no impact on Sony’s consolidated financial statements. However, its effects on future periods will depend on the nature of instruments held by Sony and its elections under the provisions of FAS No. 159.

 

 

Equity in Net Income of Affiliated Companies -  

Sony periodically reviews the presentation of its financial information to ensure that it is consistent with the way management views the consolidated operations. Since Sony considers its equity investments to be integral to its operations, effective April 1, 2008, Sony reports equity in net income of affiliated companies as a component of operating income. Prior to April 1, 2008, equity in net income of affiliated companies was presented below minority interest in income (loss) of consolidated subsidiaries and above net income in Sony’s consolidated results of operations. As a result of the reclassification, both operating income and income before income taxes increased by 1,145 million yen for the three months ended September 30, 2008, and by 3,385 million yen for the six months ended September 30, 2008. The reclassification did not affect net income for the three and six months ended September 30, 2008.

 

 

Income Taxes -

Sony estimates the annual effective tax rate (“ETR”) derived from a projected annual net income before taxes and calculates the interim period income tax provision based on the year-to-date income tax provision computed by applying the ETR to the year-to-date net income before taxes at the end of each interim period. The income tax provision based on the ETR reflects

 

 

anticipated income tax credits and net operating loss carryforwards; however, it excludes the income tax provision related to significant unusual or extraordinary transactions. Such income tax provision will be included with the provision based on the ETR in the interim period in which they occur.

 

Certain reclassifications of the financial statements for the fiscal year ended March 31, 2008 have been made to conform to the presentation for the interim period ended September 30, 2008.

 

2. Inventories

Inventories at September 30 and March 31, 2008 are summarized as follows:

 

 

 

3. Reconciliation of the Differences between Basic and Diluted Net Income per Share (“EPS”)

Reconciliation of the differences between basic and diluted EPS for the six and three months ended September 30, 2008 is as follows:

 

 

 

 

 

 

 

 

 

Potential shares of common stock upon the exercise of stock acquisition rights, which were excluded from the computation of diluted EPS since they had an exercise price in excess of the average market value of Sony’s common stock during the fiscal period, were 11,491 thousand shares for the six months ended September 30, 2008.

 

 

 

 

Potential shares of common stock upon the exercise of stock acquisition rights, which were excluded from the computation of diluted EPS since they had an exercise price in excess of the average market value of Sony’s common stock during the fiscal period, were 12,075 thousand shares for the three months ended September 30, 2008.

 

4. Commitments and Contingent Liabilities

A. Loan Commitments

Commitments outstanding at September 30, 2008 totaled 300,787 million yen. The main components of these commitments are loan agreements that subsidiaries in the Financial Services segment have entered into with their customers in accordance with the condition of the contracts.

 

B. Purchase Commitments and other

Commitments outstanding at September 30, 2008 amounted to 225,973 million yen. The major components of these commitments are as follows:

In the ordinary course of business, Sony makes commitments for the purchase of property, plant and equipment. As of September 30, 2008, such commitments outstanding were 33,614 million yen.

Certain subsidiaries in the Pictures segment have entered into agreements with creative talent for the development and production of films and television programming as well as agreements with third parties to acquire completed films, or certain rights therein. These agreements mainly cover various periods through March 31, 2011. As of September 30, 2008, these subsidiaries were committed to make payments under such contracts of 53,671 million yen.

In April 2005, Sony Corporation has entered into a partnership program contract with Fédération Internationale de Football Association (“FIFA”). Through this program Sony Corporation will be able to exercise various rights as an official sponsor of FIFA events including the FIFA World Cup^TM* from 2007 to 2014. As of September 30, 2008, Sony Corporation was committed to make payments under such contract of 23,718 million yen.

* FIFA World Cup^TM is a registered trademark of FIFA.

 

 

 

Sony had contingent liabilities including guarantees given in the ordinary course of business, which amounted to 47,590 million yen at September 30, 2008. The major components of the contingent liabilities are as follows:

In connection with the December 2007 refinancing of the debt obligation of a third party investor in Sony’s U.S. based music publishing business, Sony has issued a guarantee to a creditor of the third party investor pursuant to which Sony will provide a minimum offer of 300 million U.S. dollars to the creditor to purchase certain assets that are being held as collateral by the third party creditor against the obligation of the third party investor. The assets held as collateral for the third party investor’s obligation consist of the third party investor’s 50% ownership interest in the music publishing subsidiary. At September 30, 2008, the fair value of the collateral exceeded 300 million U.S. dollars.

The European Commission (“EC”) issued the Waste Electrical and Electronic Equipment (“WEEE”) directive in February 2003. The WEEE directive requires electronics producers after August 2005 to finance the cost for collection, treatment, recovery and safe disposal of waste products. In most member states of the European Union (“EU”), the directive has been transposed into national legislation subject to which Sony recognizes the liability for obligations associated with WEEE. As of the interim period ended September 30, 2008, the accrued amounts in respect to the above mentioned WEEE have not been significant. However, since the regulation has not been finally adopted and put into practice in all individual member states, Sony will continue to evaluate the impact of this regulation.

Sony Corporation and certain of its subsidiaries are defendants in several pending lawsuits and are subject to inquiries by various government authorities. However, based upon the information currently available to both Sony and its legal counsel, the management of Sony believes that damages from such lawsuits or inquiries, if any, are not likely to have a material effect on Sony's consolidated financial statements.

 

5. Business Segment Information

Sony is comprised of the Electronics segment, Game segment, Pictures segment, Financial Services segment and All Other. Business segment information is prepared in accordance with these segments.

The Electronics segment designs, develops, manufactures and distributes audio-visual, informational and communicative equipment, instruments and devices throughout the world. The Game segment designs, develops and sells PlayStation®2, PLAYSTATION®3 and PSP® (PlayStation Portable) game consoles and related software mainly in Japan, the U.S. and Europe, and licenses to third party software developers. The Pictures segment develops, produces and manufactures image-based software, including film, video, and television mainly in the U.S., and markets, distributes and broadcasts in the worldwide market. The Financial Services segment primarily represents individual life insurance and non-life insurance businesses in the Japanese market, leasing and credit financing businesses and a bank business in Japan. All Other consists of various operating activities, primarily including a music business, a network service business, an animation production and marketing business, and an advertising agency business in Japan. Sony’s products and services are generally unique to a single operating segment.

The operating segments reported below are the segments of Sony for which separate financial information is available and for which operating profit or loss amounts are evaluated regularly by executive management in deciding how to allocate resources and in assessing performance.

 

 

Business Segments -

 

 

 

Electronics intersegment amounts primarily consist of transactions with the Game segment, Pictures segment and All Other.

Game intersegment amounts primarily consist of transactions with the Electronics segment.

All Other intersegment amounts primarily consist of transactions with the Electronics, Game and Pictures segments.

 

 

Sales and operating revenue for the three months ended September 30, 2008 is as follows:

 

 

 

Electronics intersegment amounts primarily consist of transactions with the Game segment, Pictures segment and All Other.

Game intersegment amounts primarily consist of transactions with the Electronics segment.

All Other intersegment amounts primarily consist of transactions with the Electronics, Game and Pictures segments.

 

 

 

Segment profit or loss for the six and three months ended September 30, 2008 are as follows:

 

 

 

 

Operating income (loss) is Sales and operating revenue less Costs and expenses, and includes Equity in net income of affiliated companies.

 

 

Other Significant Items:

 

The following table is a breakdown of Electronics sales and operating revenue to external customers by product category. The Electronics segment is managed as a single operating segment by Sony’s management.

 

 

 

 

 

Geographic Information -

Sales and operating revenue attributed to countries based on location of customers for the six and three months ended September 30, 2008 are as follows:

 

 

 

 

There are not any individually material countries with respect to the sales and operating revenue included in Europe and Other areas.

Transfers between reportable business or geographic segments are made at arms-length prices.

There were no sales and operating revenue with any single major external customer for the six and three months ended September 30, 2008.

 

 

 

The following information shows sales and operating revenue and operating income by geographic origin for the six months ended September 30, 2008. In addition to the disclosure requirements under FAS No. 131, Sony discloses this supplemental information in accordance with disclosure requirements of the Financial Instruments and Exchange Act of Japan, to which Sony, as a Japanese public company, is subject.

 

 

 

 

The following information shows sales and operating revenue and operating income by geographic origin for the three months ended September 30, 2008. In addition to the disclosure requirements under FAS No. 131, Sony discloses this supplemental information in accordance with disclosure requirements of the Financial Instruments and Exchange Act of Japan, to which Sony, as a Japanese public company, is subject.

 

 

 

 

6. Subsequent Event

On October 1, 2008, Sony completed the acquisition of Bertelsmann AG's (“Bertelsmann”) 50% stake in SONY BMG MUSIC ENTERTAINMENT (“SONY BMG”). The music company, to be called SONY MUSIC ENTERTAINMENT, became a wholly owned subsidiary of Sony. The transaction was structured as follows: First, a portion of Bertelsmann's interest in SONY BMG was redeemed for approximately $600 million of cash by SONY BMG. Sony then purchased the remaining interest from Bertelsmann for approximately $600 million.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 (2) Other Information

 

i) Subsequent to September 30, 2008

An interim cash dividend for Sony Corporation Common Stock was approved at the Board of Directors meeting held on October 29, 2008 as below:

 

1. Total amount of interim cash dividends:

30,105 million yen

2. Amount of an interim cash dividend per share:

30 yen, comprising a regular cash dividend of 20 yen and a special cash dividend of 10 yen

3. Payment date:

December 1, 2008

 

Note: Interim dividends are to be distributed to the shareholders and beneficial shareholders registered as the holders or pledgees of one or more unit of shares in Sony Corporation’s register of shareholders and/or beneficial shareholders at the end of September 30, 2008.

 

ii) Litigation

On October 18, 2006, class action lawsuits were filed in California in which the plaintiffs alleged that Sony Corporation, Sony Corporation of America, Sony Electronics Inc., other named defendants, and other unnamed parties had entered into and carried out an agreement, combination, or conspiracy to fix, raise, maintain or stabilize the prices of, and allocate the market for and production of, Static Random Access Memory (“SRAM”). Numerous similar lawsuits were filed in various jurisdictions throughout the United States, which were consolidated in a single federal court for coordinated pre-trial proceedings (the “MDL Proceeding”). Sony entities reached tolling agreements with the plaintiffs’ counsel, pursuant to which such Sony entities were not named as defendants in the Consolidated Amended Complaint for the MDL Proceeding. Also, there have been similar lawsuits filed in Canada (Quebec, British Columbia and Ontario) against those Sony entities in addition to Sony of Canada Ltd. and other major SRAM manufacturers. Sony entities including Sony of Canada Ltd. entered into a tolling agreement with the plaintiffs’ counsel, pursuant to which plaintiffs withdrew their claim against all such Sony entities in these proceedings. Also, in October 2006, Sony Electronics Inc. received a Grand Jury subpoena related to a Department of Justice investigation of potential antitrust violations in the SRAM industry. Sony continues to cooperate fully with the investigation.