Sony Corporation Announces Consolidated Financial Results for the First Quarter Ended June 30, 2002

Large Improvement in Consolidated Operating Income

PRNewswire
Jul 25, 2002

Largest First Quarter Sales Ever Recorded

TOKYO, July 25 /PRNewswire-FirstCall/ -- Sony Corporation announced today its consolidated results for the first quarter ended June 30, 2002 (April 1, 2002 to June 30, 2002).

   Highlights

   *  At a time of continued uncertainty in the global economic
      environment, partly attributable to a lower yen compared with the
      same quarter of the previous year, Sony's consolidated sales
      increased to Y1,721.8 billion ($14 billion), the largest first
      quarter sales in our history.  Operating income increased
      significantly to Y51.9 billion ($436 million).

   *  In the Electronics business, while sales were almost unchanged,
      operating income increased significantly due to the contribution of
      strong-selling consumer AV products, the benefit of improvements in
      profitability from business unit restructuring, and the transfer of
      the loss-making mobile phone business to an affiliate accounted for
      under the equity method.

   *  In the Pictures business, the success of the motion picture slate,
      including the record-breaking performance of Spider-Man and a
      worldwide increase in DVD software sales, yielded a significant
      increase in both sales and operating income.

   *  The Music business recorded an operating loss primarily as a result of
      the continued contraction of the global market, despite implementation
      of ongoing restructuring initiatives.

   *  A gain was recorded on the sale of Sony's equity interest in the
      U.S.-based Telemundo Communications Group, Inc. and its subsidiaries.

   *  As a result of the increasingly difficult operating environment
      including the yen's appreciation, Sony revised its sales forecast for
      the fiscal year ending March 31, 2003, announced in April, from
      Y8,000 billion ($67 billion) to Y7,700 billion ($65 billion) while
      maintaining its profit forecast.


   (Billions of yen, millions of U.S. dollars, except per share amounts)
                                      First quarter ended June 30
                          2001          2002        Change          2002*
  Sales and operating
   revenue              Y1,633.5      Y1,721.8       + 5.4%       $14,469
  Operating income           3.0          51.9    + 1,627.3           436
  Income (loss) before
   income taxes            (14.3)        116.6           --           980
  Net income (loss)        (30.1)         57.2           --           481

  Net income (loss) per
   share for common stock
     - Basic              (32.75)        62.23           --         $0.52
     - Diluted            (32.75)        57.90           --          0.49

   * U.S. dollar amounts have been translated from yen, for convenience
     only, at the rate of Y119=U.S.$1, the approximate Tokyo foreign
     exchange market rate as of June 28, 2002.

   Remarks by Nobuyuki Idei, Chairman and CEO of Sony Corporation

The uncertain global economic environment showed no clear sign of recovery in Sony's first quarter (the three months ended June 30, 2002). However, Sony vastly exceeded our original performance forecast, achieving the largest first quarter sales in our history and a significant increase in operating income compared with the same quarter of the previous year.

In addition to the headcount reductions and manufacturing facilities reorganization begun in 1999, Sony accelerated its efforts to improve its financial structure in the previous fiscal year by establishing the design and manufacturing platform-company EMCS, withdrawing and downsizing poor-performing businesses, reducing fixed costs through restructuring and further reducing material costs. These actions spurred a recovery in operating income, particularly in the Electronics business.

Network-capable products that are expected to grow in the future, such as "Net MD" network personal audio and the "CLIE" personal data assistant, also began to contribute to profitability.

The theatrical success of Spider-Man, which exceeded $675 million in worldwide box office as of the end of June 2002, and which was the highest grossing film in the history of our Pictures business, made a large contribution to profitability during the quarter.

Despite these successes, we anticipate that the operating environment in the current fiscal year will become even more severe, putting pressure on profitability due to the appreciation of the yen and weak consumer confidence. In response to this environment, we will continue to restructure and reduce investment while striving to further improve profitability through the introduction of competitive products and services.

Consolidated Results for the First Quarter

Note I: During the first quarter ended June 30, 2002, the average value of the yen was Y126.0 against the U.S. dollar and Y115.1 against the euro, which was 3.4% lower against the U.S. dollar and 8.1% lower against the euro, compared with the average rate of the first quarter of the previous fiscal year. Operating results on a local currency basis described in the following pages reflect sales and operating revenue ("sales") and operating income (loss) obtained by applying the yen's average exchange rate in the first quarter of the previous fiscal year to local currency-denominated monthly sales, cost of sales, and selling, general and administrative expenses in the first quarter of the current fiscal year. Local currency basis results are not reflected in Sony's financial statements and are not measures conforming with Generally Accepted Accounting Principles in the U.S. ("U.S. GAAP"). In addition, Sony does not believe that these measures are a substitute for U.S. GAAP measures. However, Sony believes that local currency basis results provide additional useful information to investors regarding operating performance.

Note II: Commencing with the first quarter ended June 30, 2002, Sony has partly realigned its business segment configuration and Electronics segment product category configuration. In accordance with this realignment, results of the first quarter of the previous fiscal year have been reclassified to conform to the presentation for the first quarter ended June 30, 2002. Sales of related businesses in the Network Application and Contents Service Sector ("NACS"), established in April 2002 of this year to enhance network businesses, are included in the "Other" segment. In addition to Sony Communications Network Corporation, which was originally contained in the "Other" segment, NACS-related businesses include an information system related business, a subscriber-based wireless access system ("WLL") business and an IC card business formerly contained in the "Other" category of the Electronics segment.

Unless otherwise specified, all amounts are on a U.S. GAAP basis.

Sales were Y1,721.8 billion ($14 billion), an increase of 5.4% year on year (2% increase on a local currency basis).

   *  The increase resulted from a lower yen compared with the same quarter
      of the previous year and a significant increase in the sales of the
      Pictures segment.

Operating income was Y51.9 billion ($436 million), an increase of Y48.9 billion, or 1,627.3%, year on year (980% increase on a local currency basis).

   *  Operating income increased Y47.6 billion in the Electronics segment
      and Y12.0 billion in the Pictures segment.  Operating performance
      improved Y5.7 billion in the Game business.  Operating income
      deteriorated Y14.6 billion in the Music segment, resulting in an
      operating loss.
   *  Although selling, general and administrative (SGA) expenses increased
      Y14.3 billion because of the lower yen and higher marketing expenses
      in the Pictures business, the absence of expenses for mobile phone
      quality-related issues recorded in the same quarter of the previous
      year caused a 0.4 percentage point improvement in the ratio of SGA to
      sales.

Income before income taxes of Y116.6 billion ($980 million) was recorded compared with a loss before income taxes of Y14.3 billion in the first quarter of the previous year, an improvement of Y131.0 billion year on year.

   *  In addition to the increase in operating income, other income
      increased Y68.0 billion and other expenses decreased Y14.1 billion.
      --  Other income increased primarily because Sony recorded a
          Y66.5 billion gain* on the sale of its equity in Telemundo
          Communications Group, Inc. and its subsidiaries ("Telemundo"), a
          U.S.-based Spanish language television network and station group
          that was accounted for by the equity method.
          (*The dollar amount of the gain recorded on the sale of Telemundo
          at Sony's U.S.-based subsidiary was $511 million.)
      --  Interest expense decreased Y5.3 billion as a result of lower
          average balances of short-term borrowings and refinancing of
          certain long-term debt at lower interest rates.
      --  Loss on devaluation of securities investments increased
          Y2.7 billion to Y11.5 billion ($97 million).
      --  A Y5.7 billion ($48 million) foreign exchange gain was recorded,
          compared with a loss of Y4.6 billion in the same quarter of the
          previous year.

Net income of Y57.2 billion ($481 million) was recorded, compared with a net loss of Y30.1 billion in the first quarter of the previous year, an increase of Y87.3 billion year on year.

   *  Income taxes increased Y33.4 billion and equity in net losses of
      affiliated companies increased Y3.8 billion.  Moreover, in the same
      quarter of the previous year, Y6.0 billion in profit was recorded for
      a cumulative effect of accounting changes.
      --  Income taxes increased due to higher income before income taxes.
          The effective income tax rate was 46.0%.
      --  Equity in net losses of affiliated companies increased because
          Sony recorded a Y4.8 billion ($40 million) loss for its portion of
          the loss generated by Sony Ericsson Mobile Communications, AB, a
          mobile handset joint venture established in October 2001.

   Operating Performance Highlights by Business Segment

Note III: "Sales and operating revenue" in each business segment represents sales and operating revenue recorded before intersegment transactions are eliminated. "Operating income" in each business segment represents operating income recorded before intersegment transactions and unallocated corporate expenses are eliminated.

Note IV: Sales of mobile handsets are no longer recorded in the "Information and Communications" product category of the Electronics segment as of the second half of the prior fiscal year. From the second half of the prior fiscal year, sales of mobile handsets manufactured for Sony Ericsson Mobile Communications, AB, established in October 2001, are recorded in the "Other" product category of the Electronics segment.

  Electronics
                             (Billions of yen, millions of U.S. dollars)
                                      First quarter ended June 30
                           2001         2002         Change         2002
  Sales and operating
   revenue              Y1,220.0      Y1,218.9        - 0.1%      $10,243
  Operating income           1.5          49.1      3,221.6           413

  Unless otherwise specified, all amounts are on a U.S. GAAP basis.

Sales were Y1,218.9 billion ($10 billion), almost unchanged year on year (3% decrease on a local currency basis).

   *  On a product category basis, sales increased in "Televisions" by 27.7%,
      in "Components" by 5.9%, in "Video" by 5.7%, and in "Information and
      Communications" (excluding the results of the mobile phone business in
      the prior year) by 4.0%.
   *  Sales decreased in "Semiconductors" by 7.5% and in "Audio" by 4.9%.
      --  On a local currency basis:
          ~  Products with significant increases in sales were
             WEGA televisions (including projection TVs), VAIO PCs
             (especially desktops), digital still cameras ("Cyber Shot"
             and others) and personal digital assistants ("CLIE").
          ~  Products with significant decreases in sales were
             computer displays, car audio and broadcast- and
             professional-use products.
          ~  On a geographic basis, sales in Japan decreased
             (especially sales of notebook PCs and video cameras),
             while sales in all other regions increased (especially sales
             of CRT-based televisions).

Operating income was Y49.1 billion ($413 million), an increase of Y47.6 billion, or 3,221.6%, year on year (2,007% increase on a local currency basis).

   *  Reasons for the significant increase in operating income include:
      --  The fact that the mobile phone business that recorded losses
          in the same quarter of the previous year became an equity
          affiliate as a result of the establishment of the joint venture
          with Ericsson.
      --  An improvement in the profitability of consumer AV products
          including digital still cameras, televisions and video cameras.
      --  Further cost reductions and increased productivity from the
          activities of the manufacturing platform, EMCS.
      --  An improvement in profitability from the rationalization and
          downsizing of loss-making businesses (such as in the audio
          business and in the component business, including CRTs) and a
          reduction in fixed costs.
      --  A lower yen compared with the same quarter of the previous year.
   *  On a product category basis, "Video," in which digital still cameras
      and video cameras were particularly well received, "Components," which
      enjoyed a strong contribution from recording media and optical pick-
      ups, and "Audio," in which personal audio devices sold well, increased
      in profitability.  "Televisions," in which consumer televisions sold
      well, exhibited an improvement in profitability and turned to black.

Regarding the performance of Aiwa Co., Ltd., sales continued to decrease and losses increased. Sony has decided to take Aiwa private effective October 1, 2002.

Inventory as of June 30, 2002 was Y576.2 billion ($4,842 million), a Y304.2 billion, or 34.7%, decrease compared with the level as of June 30, 2001, and a Y64.2 billion, or 12.5%, increase compared with the level as of March 31, 2002.

  Game
                           (Billions of yen, millions of U.S. dollars)
                                    First quarter ended June 30
                           2001          2002         Change        2002
  Sales and operating
   revenue                Y154.9        Y153.2        - 1.1%       $1,287
  Operating income (loss)   (3.1)          2.6           --            21

   Unless otherwise specified, all amounts are on a U.S. GAAP basis.

Sales were Y153.2 billion ($1,287 million), a decrease of 1.1% compared with the first quarter of the previous year (5% decrease on a local currency basis).

   *  Software sales were strong, especially in Europe and the U.S.
      Hardware sales declined as unit sales in Japan fell short of the same
      quarter of the previous year, while unit sales in Europe and the U.S.
      increased, and as the price of PlayStation 2 ("PS 2") and PS one in
      all regions was reduced below that of the same quarter of the prior
      year.
      --  On a geographic and local currency basis, sales decreased in
          Japan and in the U.S. but increased in Europe.
   *  Worldwide hardware production shipments:
      --  PS 2: 4.59 million units (an increase of 0.25 million units)
      --  PS one: 0.67 million units (a decrease of 2.54 million units)
   *  Worldwide software production shipments:
      --  PS 2: 27.00 million units (an increase of 15.50 million units)
      --  PlayStation: 13.00 million units (a decrease of 5.00 million
          units)

In terms of profitability, operating income of Y2.6 billion ($21 million) was recorded compared with an operating loss of Y3.1 billion in the first quarter of the previous fiscal year, an improvement of Y5.7 billion year on year.

   *  Despite the impact of the hardware price reductions, an increase in
      profitability from PS 2 hardware cost reductions and the expansion of
      software sales caused an improvement in profitability of the segment
      as a whole.

Inventory as of June 30, 2002 was Y149.7 billion ($1,258 million), a Y39.2 billion, or 20.8%, decrease compared with the level as of June 30, 2001, and a Y30.7 billion, or 25.8%, increase compared with the level as of March 31, 2002.

  Music
                             (Billions of yen, millions of U.S. dollars)
                                   First quarter ended June 30
                           2001          2002         Change        2002
  Sales and operating
   revenue                Y145.3        Y137.2        - 5.6%       $1,153
  Operating income (loss)    4.4         (10.3)          --           (86)

The amounts presented above are the sum of the yen-translated results of Sony Music Entertainment Inc. ("SMEI"), a U.S. based operation which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis, and the results of Sony Music Entertainment (Japan) Inc. ("SMEJ"), a Japan based operation which aggregates results in yen. Management analyzes the results of SMEI in U.S. dollars, so discussion of certain portions of its results are specified as being on "a U.S. dollar basis."

Sales were Y137.2 billion ($1,153 million), a decrease of 5.6% year on year (8% decrease on a local currency basis). 73% of the Music segment's sales were generated by SMEI. 27% of sales were generated by SMEJ.

   *  SMEI's sales (on a U.S. dollar basis) increased 4%.
      --  Sales increased because an increase in demand for DVD
          software caused manufacturing sales to the Pictures and Game
          segments to rise.
      --  Partially offsetting the increase in sales was a decrease in
          album sales due to the continued contraction of the global music
          industry brought on by digital piracy and other factors.
      --  Best selling titles included Korn's Untouchables, Celine Dion's A
          New Day Has Come, Shakira's Laundry Service and the Spider-Man
          soundtrack.
   *  SMEJ's sales decreased 29%.
      --  Sales decreased because album sales declined due to the continued
          contraction of the music industry and because, compared with the
          previous year, album releases by major artists are concentrated in
          future quarters.
      --  Best selling titles included the 2002 FIFA World Cup Official
          Album, Chitose Hajime's Wadatsumi no ki, and Chemistry's Kimi wo
          sagashiteta.

In terms of profitability, an operating loss of Y10.3 billion ($86 million) was recorded compared with operating income of Y4.4 billion in the first quarter of the previous year, a deterioration of Y14.6 billion year on year.

   *  SMEI's operating loss (on a U.S. dollar basis) increased significantly.
      --  This was a result of a decline in album sales, costs incurred for
          the closure and consolidation of certain international
          distribution facilities and worldwide headcount reductions, and
          increased talent-related expenses.
      --  Partially offsetting the increased loss were the benefit of
          aggressive worldwide restructuring and cost reduction initiatives
          and increased profit from the rise in manufacturing sales
          mentioned above.
   *  SMEJ recorded an operating loss compared with operating income in
      the same quarter of the previous year.
      --  Profitability deteriorated due to the significant drop in sales
          and the fact that a gain on the sale of a studio facility was
          recorded in the same quarter of the previous year.

In June 2002, SMEI sold a majority of its 50% equity interest in The Columbia House Company ("CHC"). Cash of Y17.8 billion ($150 million) and Y8.0 billion ($67 million) of notes were received upon the closing. A gain of Y1.3 billion ($11 million) was recorded on this sale in "gain on sales of securities investments, net" (in other income). SMEI now holds a 7.5% interest in CHC.

In early July, SMEI's joint venture publishing company, Sony/ATV Music Publishing LLC announced its agreement to purchase from Gaylord Entertainment Company the music publishing catalogue and real estate of Acuff-Rose, a music publishing business, for $157 million in cash. The closing of this transaction is expected in the second quarter of the current fiscal year subject to government approvals.

  Pictures
                              (Billions of yen, millions of U.S. dollars)
                                     First quarter ended June 30
                           2001          2002       Change         2002
  Sales and operating
   revenue                Y136.2        Y173.6       + 27.5%       $1,459
  Operating income (loss)   (2.7)          9.3           --            78

The results presented above are a yen-translation of the results of Sony Pictures Entertainment ("SPE"), a U.S. based operation which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis. Management analyzes the results of SPE in U.S. dollars, so discussion of certain portions of its results are specified as being on "a U.S. dollar basis."

Sales were Y173.6 billion ($1,459 million), an increase of 27.5% year on year (23% increase on a U.S dollar basis).

   *  The reasons for the increase in sales (on a U.S. dollar basis) were:
      --  The success of Spider-Man's theatrical release.
          ~  With a U.S. box office during the quarter of almost
             $400 million, Spider-Man became the fifth highest grossing
             film in U.S. history and the third film to reach such a
             threshold in its initial release.
          ~  Worldwide box office for Spider-Man exceeded $675 million by
             the end of June 2002, making it the highest grossing film in
             SPE's history.
      --  The strong theatrical performance of Panic Room.
      --  The strength of DVD and VHS software sales including Black Hawk
          Down, Ali, The Mothman Prophecies and Not Another Teen Movie.
   *  The increase in sales was partially offset (on a U.S. dollar
      basis) by:
      --  License revenue from a Wheel of Fortune contract extension
          recognized in the previous year with no comparable amount
          recognized in the current year.
      --  Lower network television revenues as a result of consolidating the
          U.S. television business.

In terms of profitability, operating income of Y9.3 billion ($78 million) was recorded compared with an operating loss of Y2.7 billion in the first quarter of the previous year, an improvement of Y12.0 billion year on year.

   *  The reason for the improvement in profitability (on a U.S. dollar
      basis) was:
      --  The strength of the theatrical sales and DVD/VHS software sales
          discussed above.
   *  Partially offsetting the improvement in profitability (on a U.S.
      dollar basis) were:
      --  Higher marketing expenses for unreleased films including Men in
          Black II and Stuart Little 2, which were released in July 2002,
          compared to the same quarter of the previous year.
      --  A provision with respect to income recorded from a financially
          impaired licensee of feature film and television product.
      --  The absence of the Wheel of Fortune license revenue recognized in
          the previous year.

In April 2002, SPE sold its entire equity interest in Telemundo. Cash proceeds of Y88.4 billion* were received upon the closing and a gain of Y66.5 billion* was recorded on this sale in "gain on sales of securities investments, net" (in other income).

(*The dollar amount of the cash proceeds and gain recorded on the sale of Telemundo were $679 million and $511 million, respectively.)

  Financial Services
                             (Billions of yen, millions of U.S. dollars)
                                     First quarter ended June 30
                           2001          2002         Change        2002
  Financial service
   revenue                Y126.6        Y129.2        + 2.1%       $1,085
  Operating income           9.6          10.9       + 12.9            91


   Unless otherwise specified, all amounts are on a U.S. GAAP basis.

Financial service revenue was Y129.2 billion ($1,085 million), an increase of 2.1% year on year.

   *  Revenue at Sony Life Insurance Co., Ltd. ("Sony Life") remained
      unchanged as an increase in insurance revenue caused by an increase in
      insurance-in-force was offset by valuation losses from investment
      under separate account for variable life insurance and variable
      annuity products (reflecting the weak Japanese stock market).
      Valuation gains and losses from investment under separate account
      accrue directly to the account of policyholders and, therefore, do not
      affect operating income.
   *  Revenue at Sony Assurance Inc. increased significantly due to an
      increase in insurance revenue brought about by an expansion of newly
      acquired insurance-in-force.
   *  Revenue at Sony Finance International, Inc. ("Sony Finance") remained
      unchanged.

Operating income was Y10.9 billion ($91 million), an increase of Y1.2 billion, or 12.9%, year on year.

   *  Operating income at Sony Life increased due to the increase in
      insurance revenue.
   *  Losses at Sony Assurance Inc. decreased due to the increase in
      insurance revenue.
   *  Income decreased slightly at Sony Finance as a result of an increase
      in operating expenses and a decrease in leasing and other revenue.
   *  Sony Bank, which began operations in June 2001, recorded a loss.


  Other
                              (Billions of yen, millions of U.S. dollars)
                                     First quarter ended June 30
                            2001         2002        Change         2002
  Sales and operating
   revenue                 Y46.2         Y55.0       + 19.1%         $462
  Operating income (loss)   (4.3)         (6.8)          --           (57)

    Unless otherwise specified, all amounts are on a U.S. GAAP basis.

  Sales were Y55.0 billion ($462 million), an increase of 19.1% year on year.
    *  As a result of the advertising agency business subsidiary in Japan
       undertaking the media buying for all Sony Group companies in Japan,
       sales at the subsidiary increased significantly.
    *  Sales of NACS related businesses, including Sony Communication
       Network Corporation ("SCN"), increased (see Note II).

In terms of profitability, an operating loss of Y6.8 billion ($57 million) was recorded compared with an operating loss of Y4.3 billion in the first quarter of the previous year, a deterioration of Y2.5 billion year on year.

   *  Loss increased at a location-based entertainment business in the
      U.S. due to an impairment loss for certain long-lived assets.
   *  Loss increased at the advertising agency business subsidiary in Japan
      primarily because of early retirement expenses.
   *  Loss continued to be recorded at NACS related businesses in the
      aggregate, but SCN recorded operating income.


  Cash Flow
                              (Billions of yen, millions of U.S. dollars)
                                     Three months ended June 30
                          2001           2002      Difference       2002
  Cash flow
    - From operating
      activities         (Y189.2)        Y22.1    Y + 211.3          $186
    - From investing
      activities          (146.6)        (83.3)      + 63.3          (700)
    - From financing
      activities           270.3         (39.1)     - 309.3          (328)
  Cash and cash
   equivalents
   as of June 30           542.5         561.0       + 18.4         4,714

Cash provided by operating activities increased Y211.3 billion to Y22.1 billion ($186 million).

   *  While uses of cash including an increase in inventories, primarily
      in the Electronics business, occurred during the quarter, the
      recording of positive net income, depreciation and amortization and an
      increase in notes and accounts payable caused cash generated to exceed
      expenditures.
   *  An improvement in the profitability of the Electronics and Pictures
      businesses, a decrease in the size of the increase in inventories and
      the increase in notes and accounts payable contributed to the
      significant increase in cash provided by operating activities compared
      with the same quarter of the previous year.

Cash used in investing activities decreased Y63.3 billion to Y83.3 billion ($700 million).

   *  In the businesses other than Financial Services, Sony prioritized
      investments, primarily in the Electronics business, and realized cash
      proceeds of Y110.5 billion ($928 million) from the sales of securities
      investments and collections of advances, including Y88.4 billion* from
      the sale of equity in Telemundo and Y17.8 billion ($150 million) from
      the sale of equity in CHC.  (*The dollar amount of the cash proceeds
      recorded on the sale of Telemundo was $679 million.)
   *  In the Financial Services business, reflecting an increase in assets
      under management in the life insurance and banking businesses,
      investments and advances were Y219.2 billion ($1,842 million),
      exceeding the Y103.5 billion ($870 million) in sales and maturities of
      securities investments and collections of advances also recorded.

Cash used in financing activities was Y39.1 billion ($328 million). Y270.3 billion of cash was provided by financing activities in the same quarter of the previous year.

   *  Although cash was provided by an increase in deposits from customers
      in the banking business, cash was used during the quarter to pay down
      short-term borrowings.


   Outlook for the Fiscal Year ending March 31, 2003

Regarding the forecast for the fiscal year ending March 31, 2003, we believe that the increasingly difficult operating environment (evidenced by the appreciation of the yen and lack of consumer confidence) will continue. Due to this belief, we have revised our April forecast for sales from Y8,000 billion to Y7,700 billion.

However, in regard to profit, there are several positive and negative factors that essentially offset each other, thereby resulting in no change in our forecast for operating income, income before income taxes and net income. On an overall basis, there will be a negative impact from the appreciation of the yen in all segments excluding Financial Services and Other. This will be offset to some extent by the fact that the first quarter performance was stronger than our April projections. The following other factors, when combined, are expected to account for the remaining offset:

   *  In the Electronics business:
      --  Further improvement in profitability due to an increase in added
          value from an enhancement in the attractiveness of products and
          greater material cost reductions, and due to the continued
          promotion of business unit restructuring.

   *  In the Music business:
      --  Greater pressure on profitability caused by the continued
          contraction of the global market for music.

   *  In the Pictures business:
      --  An increase in profitability as a result of recent successful
          theatrical releases and projected subsequent sales of DVD software
          in the second half of the fiscal year.

                                                  Change from previous year
   Sales and operating revenue     Y7,700 billion          + 2%
   Operating income                   280 billion        + 108
   Income before income taxes         310 billion        + 234
   Net income                         150 billion        + 880

Assumed exchange rates from the second quarter: approximately Y115 to the dollar and Y115 to the euro.

(Exchange rates assumed in April: approximately Y130 to the dollar and Y115 to the euro.)

No change was made in capital expenditures and depreciation and amortization.

   Capital expenditures (additions to fixed assets)   Y280 billion     - 14%
    Depreciation and amortization*                     350 billion      - 1
    (Depreciation expenses for tangible assets)       (260 billion)   (- 13)

    *  Including amortization of intangible assets and amortization of
       deferred insurance acquisition costs


  Cautionary Statement

Statements made in this release with respect to Sony's 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 using words such as "believe," "expect," "plans," "strategy," "prospects," "forecast," "estimate," "project," "anticipate," "may" or "might" and words of similar meaning in connection with a discussion of future operations or financial performance. 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; (ii) exchange rates, particularly between the yen and the U.S. dollar, 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 its products and services, which are offered in highly competitive markets characterized by continual new product introductions, rapid development in technology (particularly in the Electronics business), and subjective and changing consumer preferences (particularly in the Game, Music, and Pictures businesses); (iv) Sony's ability to implement successfully the restructuring initiatives in its Electronics, Music and Pictures businesses and its network strategy for its Electronics, Music and Pictures businesses; (v) Sony's ability to compete and develop and implement successful sales and distribution strategies in light of Internet and other technological developments in its Music and Pictures businesses; (vi) Sony's continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to prioritize investments (particularly in the Electronics business); (vii) the success of Sony's joint ventures and alliances; and (viii) the outcome of contingencies. Risks and uncertainties also include the impact of any future events with material unforeseen impacts.

   Business Segment Information

                           (Millions of yen, millions of U.S. dollars)
                                   Three months ended June 30
  Sales and operating      2001        2002          Change         2002
   revenue

  Electronics
    Customers         Y1,068,287    Y1,126,720         +5.5%       $9,468
    Intersegment         151,745        92,158                        775
    Total              1,220,032     1,218,878         -0.1        10,243

  Game
    Customers            150,890       149,535         -0.9         1,257
    Intersegment           4,051         3,644                         30
    Total                154,941       153,179         -1.1         1,287

  Music
    Customers            133,590       121,830         -8.8         1,024
    Intersegment          11,718        15,338                        129
    Total                145,308       137,168         -5.6         1,153

  Pictures
    Customers            136,168       173,629        +27.5         1,459
    Intersegment               0             0                          0
    Total                136,168       173,629        +27.5         1,459

  Financial Services
    Customers            119,600       122,350         +2.3         1,028
    Intersegment           6,974         6,819                         57
    Total                126,574       129,169         +2.1         1,085

  Other
    Customers             24,961        27,742        +11.1           233
    Intersegment          21,201        27,255                        229
    Total                 46,162        54,997        +19.1           462

  Elimination           (195,689)     (145,214)          --        (1,220)
  Consolidated total  Y1,633,496    Y1,721,806         +5.4%      $14,469

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

Music intersegment amounts primarily consist of transactions with Game and Pictures businesses.

Other intersegment amounts primarily consist of transactions with the Electronics business.

  Operating income (loss)  2001         2002        Change          2002

  Electronics             Y1,479       Y49,126    +3,221.6%          $413
  Game                    (3,127)        2,573           --            21
  Music                    4,391       (10,252)          --           (86)
  Pictures                (2,710)        9,266           --            78
  Financial Services       9,622        10,866        +12.9            91
  Other                   (4,347)       (6,822)          --           (57)
  Total                    5,308        54,757       +931.6           460

  Corporate and
   elimination            (2,305)       (2,887)          --           (24)
  Consolidated total      Y3,003       Y51,870    +1,627.3%          $436

Commencing with the first quarter ended June 30, 2002, Sony has partly realigned its business segment configuration.

Results in the first quarter of the previous year have been reclassified to conform to the presentation for the current quarter. For detailed information on these changes, refer to Note II of "Consolidated Results for the First Quarter."

   Electronics Sales and Operating Revenue to Customers by Product Category

                           (Millions of yen, millions of U.S. dollars)
                                     Three months ended June 30
  Sales and operating      2001         2002          Change       2002
   revenue

  Audio                 Y169,842      Y161,480         -4.9%       $1,357
  Video                  199,956       211,364         +5.7         1,776
  Televisions            152,469       194,698        +27.7         1,636
  Information and
   Communications        263,993       251,589         -4.7         2,114
  Semiconductors          52,254        48,354         -7.5           406
  Components             121,782       128,999         +5.9         1,084
  Other                  107,991       130,236        +20.6         1,095
  Total               Y1,068,287    Y1,126,720         +5.5%       $9,468

The above table is a breakdown of Electronics sales and operating revenue to customers in the Business Segment Information. The Electronics business is managed as a single operating segment by Sony's management. However, Sony believes that the information in this table is useful to investors in understanding the sales contributions of the products in this business segment. In addition, commencing with the first quarter ended June 30, 2002, Sony has partly realigned its product category configuration in the Electronics business. In accordance with this change, results in the first quarter of the previous year have been reclassified to conform to the presentations for the current quarter. For detailed information on these changes, refer to Note II of "Consolidated Results for the First Quarter." Sales of mobile phones are no longer recorded in the "Information and Communications" category as of the third quarter ended December 31, 2001. From the third quarter of the previous year, sales of mobile phones manufactured for Sony Ericsson Mobile Communications, AB are recorded in the "Other" product category.

   Geographic Segment Information

                         (Millions of yen, millions of U.S. dollars)
                                   Three months ended June 30
  Sales and operating      2001         2002         Change         2002
   revenue

  Japan                 Y532,757      Y503,134         -5.6%       $4,228
  United States          502,674       558,214        +11.0         4,691
  Europe                 310,577       345,727        +11.3         2,905
  Other Areas            287,488       314,731         +9.5         2,645
  Total               Y1,633,496    Y1,721,806         +5.4%      $14,469


Classification of Geographic Segment Information shows sales and operating revenue recognized by location of customers.

  Consolidated Statements of Income (Unaudited)

  (Millions of yen, millions of U.S. dollars, except per share amounts)
                                     Three months ended June 30
                          2001         2002          Change         2002
  Sales and operating revenue:                          %
  Net sales           Y1,506,392    Y1,589,158                    $13,354
  Financial service
   revenue               119,600       122,350                      1,028
  Other operating revenue  7,504        10,298                         87
                       1,633,496     1,721,806         +5.4        14,469

  Costs and expenses:
  Cost of sales        1,112,656     1,136,249                      9,548
  Selling, general
   and administrative    407,859       422,203                      3,548
  Financial service
   expenses              109,978       111,484                        937
                       1,630,493     1,669,936                     14,033

  Operating income         3,003        51,870     +1,627.3           436

  Other income:
  Interest and dividends   4,101         3,938                         33
  Royalty income           5,176         5,289                         44
  Foreign exchange
   gain, net                  --         5,678                         48
  Gain on sales of
   securities investments,
   net                        --        68,366                        575
  Other                   12,993         6,987                         58
                          22,270        90,258                        758

  Other expenses:
  Interest                12,082         6,830                         57
  Loss on devaluation of
   securities investments  8,803        11,524                         97
  Foreign exchange loss,
   net                     4,623            --                         --
  Other                   14,092         7,131                         60
                          39,600        25,485                        214

  Income (loss) before
   income taxes          (14,327)      116,643           --           980

  Income taxes            20,267        53,633                        451

  Income (loss) before
   minority interest,
   equity in net losses
   of affiliated companies
   and cumulative effect
   of accounting
   changes               (34,594)       63,010                        529

  Minority interest
   in income (loss) of
   consolidated
   subsidiaries           (3,214)       (2,607)                       (23)
  Equity in net
   losses of affiliated
   companies               4,676         8,436                         71

  Income (loss) before
   cumulative effect of
  accounting changes     (36,056)       57,181           --           481

  Cumulative effect
   of accounting changes
   (2001:Net of income
   taxes of
   Y2,975 million)         5,978            --                         --

  Net income (loss)     Y(30,078)      Y57,181           --          $481

  Per share data
  Common stock
  Income (loss) before
   cumulative effect of
   accounting changes
    - Basic              Y(39.26)       Y62.23           --         $0.52
    - Diluted             (39.26)        57.90           --          0.49
  Net income (loss)
    - Basic              Y(32.75)       Y62.23           --         $0.52
    - Diluted             (32.75)        57.90           --          0.49

  Subsidiary tracking stock
  Net income (loss)
    - Basic               Y(0.26)        Y7.30           --         $0.06


   Consolidated Balance Sheets (Unaudited)

                             (Millions of yen, millions of U.S. dollars)
                        June 30       March 31     June 30        June 30
        ASSETS            2001          2002         2002           2002
  Current assets:
   Cash and cash
    equivalents         Y542,528      Y683,800     Y560,977        $4,714
   Time deposits           4,290         5,176        6,997            59
   Marketable securities 125,045       162,147      169,060         1,421
   Notes and accounts
    receivable, trade  1,275,148     1,363,652    1,269,328        10,667
   Allowance for
    doubtful accounts
    and sales returns   (107,640)     (120,826)    (106,419)         (894)
   Inventories         1,115,398       673,437      769,100         6,463
   Deferred income taxes 145,305       134,299      135,657         1,140
   Prepaid expenses
    and other current
    assets               428,095       435,527      472,253         3,967
   Total current
    assets             3,528,169     3,337,212    3,276,953        27,537

  Film costs             318,094       313,054      292,944         2,462

  Investments and advances
   Affiliated companies  108,517       131,068       92,682           779
   Securities investments
    and other          1,345,752     1,566,739    1,646,357        13,835
                       1,454,269     1,697,807    1,739,039        14,614

  Property, plant and
   equipment
   Land                  185,449       195,292      192,294         1,616
   Buildings             841,549       891,436      866,642         7,283
   Machinery and
    equipment          2,141,340     2,216,347    2,129,989        17,899
   Construction in
    progress             136,105        66,825       55,034           462
   Less - Accumulated
    depreciation      (1,869,398)   (1,958,234)  (1,895,679)      (15,930)
                       1,435,045     1,411,666    1,348,280        11,330
  Other assets:
   Intangibles, net      218,961       245,639      241,145         2,026
   Goodwill, net         305,886       317,240      296,446         2,491
   Deferred insurance
    acquisition costs    279,276       308,204      314,775         2,645
   Other                 437,949       554,973      548,373         4,609
                       1,242,072     1,426,056    1,400,739        11,771
                      Y7,977,649    Y8,185,795   Y8,057,955       $67,714

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
   Short-term
    borrowings          Y475,796      Y113,277      Y49,318          $414
   Current portion
    of long-term debt    143,966       240,786      217,068         1,824
   Notes and accounts
    payable, trade       920,070       767,625      813,935         6,840
   Accounts payable,
    other and accrued
    expenses             708,766       869,533      770,370         6,474
   Accrued income and
    other taxes           75,278       105,470       74,106           623
   Deposits from customers
    in the banking
    business               3,673       106,472      144,861         1,217
   Other                 426,748       355,333      367,242         3,086
   Total current
    liabilities        2,754,297     2,558,496    2,436,900        20,478

  Long-term liabilities:
   Long-term debt        822,009       838,617      830,097         6,976
   Accrued pension and
    severance costs      223,643       299,089      303,986         2,555
   Deferred income taxes 176,686       159,573      171,109         1,438
   Future insurance
    policy benefits
    and other          1,438,189     1,680,418    1,738,362        14,608
   Other                 251,588       255,824      242,692         2,038
                       2,912,115     3,233,521    3,286,246        27,615

  Minority interest
   in consolidated
   subsidiaries           24,594        23,368       22,437           189

  Stockholders' equity:
   Capital stock         475,974       476,106      476,131         4,001
   Additional paid-in
    capital              968,091       968,223      968,261         8,137
   Retained earnings   1,186,968     1,209,262    1,266,441        10,642
   Accumulated other
    comprehensive
    income              (336,960)     (275,593)    (390,835)       (3,284)
   Treasury stock,
    at cost              (7,430)       (7,588)      (7,626)          (64)
                      2,286,643     2,370,410    2,312,372        19,432
                     Y7,977,649    Y8,185,795   Y8,057,955       $67,714


   Consolidated Statements of Cash Flows (Unaudited)

                          (Millions of yen, millions of U.S. dollars)
                                   Three months ended June 30
                                  2001             2002            2002
  Cash flows from
   operating activities:
  Net income (loss)              Y(30,078)        Y57,181          $481
  Adjustments to reconcile
   net income (loss) to
   net cash provided by (used in)
   operating activities
  Depreciation and amortization,
   including amortization of
   deferred insurance acquisition
   costs                           80,045          83,318           700
  Amortization of film costs       54,655          62,740           527
  Accrual for pension and
   severance costs, less payments   2,963           7,408            62
  Gain or loss on sale, disposal
   or impairment of long-lived
   assets, net                       (859)          5,383            45
  Gain on sales of securities
   investments, net                    --         (68,366)         (575)
  Deferred income taxes            (4,108)         20,881           175
  Equity in net losses of
   affiliated companies, net
   of dividends                     4,676           8,537            72
  Cumulative effect of
   accounting changes              (5,978)             --            --
  Changes in assets and liabilities:
  Decrease in notes and
   accounts receivable - trade    125,880           5,410            45
  Increase in inventories        (172,787)       (120,380)       (1,012)
  Increase in film costs          (73,014)        (75,602)         (635)
  Increase (decrease) in notes
   and accounts payable - trade    (6,234)         60,400           508
  Decrease in accrued income
   and other taxes                (71,372)        (33,592)         (282)
  Increase in future insurance
   policy benefits and other       72,176          57,944           487
  Increase in deferred insurance
   acquisition costs              (17,708)        (16,353)         (137)
  Changes in other current
   assets and liabilities, net   (115,692)        (68,003)         (571)
  Other                           (31,753)         35,195           296
  Net cash provided by (used in)
   operating activities          (189,188)         22,101           186

  Cash flows from investing activities:
  Payments for purchases
   of fixed assets                (80,319)        (67,776)         (570)
  Proceeds from sales of
   fixed assets                    14,989           2,201            18
  Payments for investments and
   advances by financial
   service business              (113,400)       (219,192)       (1,842)
  Payments for investments and
   advances (other than
   financial service
   business)                      (22,396)        (10,390)          (87)
  Proceeds from sales and
   maturities of securities
   investments and collections
   of advances by financial
   service business                40,719         103,520           870
  Proceeds from sales of
   securities investments
   and collections of advances
   (other than financial
   service business)                8,059         110,481           928
  Payments for purchases of
   marketable securities             (416)            (17)           (0)
  Proceeds from sales of
   marketable securities            4,425             202             2
  (Increase) decrease in
   time deposits                    1,723          (2,316)          (19)
  Net cash used in investing
   activities                    (146,616)        (83,287)         (700)

  Cash flows from financing activities:
  Proceeds from issuance
   of long-term debt                1,119           6,751            57
  Payments of long-term debt      (26,963)         (9,574)          (80)
  Increase (decrease) in
   short-term borrowings          286,255         (57,216)         (481)
  Increase in deposits from
   customers in the banking
   business                         3,673          38,389           323
  Proceeds from issuance of
   subsidiary tracking stock        9,529              --            --
  Dividends paid                  (11,514)        (11,521)          (97)
  Other                             8,152          (5,883)          (50)
  Net cash provided by (used in)
   financing activities           270,251         (39,054)         (328)

  Effect of exchange rate
   changes on cash and
   cash equivalents                   836         (22,583)         (190)

  Net decrease in cash
   and cash equivalents           (64,717)       (122,823)       (1,032)
  Cash and cash equivalents
   at beginning of the
   first quarter                  607,245         683,800         5,746

  Cash and cash equivalents
   at end of the first quarter   Y542,528        Y560,977        $4,714


   (Notes)

   1.  U.S. dollar amounts have been translated from yen, for convenience
       only, at the rate of Y119 = U.S.$1, the approximate Tokyo foreign
       exchange market rate as of June 28, 2002.

   2.  As of June 30, 2002, Sony had 1,063 consolidated subsidiaries.  It
       has applied the equity accounting method in respect to its 83
       affiliated companies.

   3.  Sony calculates and presents per share data separately for Sony's
       Common stock and for the subsidiary tracking stock which is linked to
       the economic value of Sony Communication Network Corporation, based
       on Statement of Financial Accounting Standards ("FAS") No.128,
       "Earnings per Share".  The holders of the tracking stock have the
       right to participate in earnings, together with common stock holders.
       Accordingly, Sony calculates per share data by the "two-class" method
       based on FAS No.128.  Under this method, basic net income per share
       for each class of stock is calculated based on the earnings allocated
       to each class of stock for the applicable period, divided by the
       weighted-average number of outstanding shares in each class during
       the applicable period. The earnings allocated to the subsidiary
       tracking stock are determined based on the subsidiary tracking stock
       holders' economic interest in the targeted subsidiary's earnings
       available for dividends.  The earnings allocated to Common stock are
       calculated by subtracting the earnings allocated to the subsidiary
       tracking stock from Sony's net income for the period.

       Weighted-average shares used for computation of earnings per share of
       Common stock are as follows.  The dilutive effect mainly resulted
       from convertible bonds.  In accordance with FAS No.128, the
       computation of diluted net income per share for the three months
       ended June 30, 2001 uses the same weighted-average shares used for
       the computation of diluted income before cumulative effect of
       accounting changes per share, and reflects the effect of the assumed
       conversion of convertible bonds in diluted net income.


    Weighted-average shares                        (Thousands of shares)
                                                Three months ended June 30
                                                     2001         2002
    Income (loss) before cumulative effect
     of accounting changes and net income (loss)
     - Basic                                       918,415      918,517
     - Diluted                                     918,415      997,579

       Weighted-average shares used for computation of earnings per share of
       the subsidiary tracking stock for the three months ended June 30,
       2001 and 2002 are 3,072 thousand shares. There were no potentially
       dilutive securities for the subsidiary tracking stock outstanding at
       June 30, 2001 and 2002.

   4.  Sony's comprehensive income is comprised of net income and other
       comprehensive income.  Other comprehensive income includes changes in
       unrealized gains or losses on securities, unrealized gains or losses
       on derivative instruments, minimum pension liability adjustment and
       foreign currency translation adjustments.  Net income, other
       comprehensive income and comprehensive income for the three months
       ended June 30, 2001 and 2002 were as follows;


                               (Millions of yen, millions of U.S. dollars)
                                        Three months ended June 30
                                    2001            2002           2002
  Net income (loss)              Y(30,078)        Y57,181          $481
  Other comprehensive
   income (loss)                   (8,393)       (115,242)         (969)
  Unrealized gains (losses) on
   securities                      (8,066)          5,994            50
  Unrealized gains on
   derivative instruments           1,450             289             2
  Foreign currency translation
   adjustments                     (1,777)       (121,525)       (1,021)
  Comprehensive income (loss)    Y(38,471)       Y(58,061)        $(488)


   5.  On April 1, 2001, Sony adopted FAS No.133, "Accounting for Derivative
       Instruments and Hedging Activities" as amended by FAS No.138
       "Accounting for Certain Derivative Instruments and Certain Hedging
       Activities -- an Amendment of FASB statement No.133".  As a result of
       the adoption of the new standard, Sony recorded a one-time non-cash
       after-tax unrealized gain of Y1,089 million in accumulated other
       comprehensive income in the consolidated balance sheet, as well as an
       after-tax gain of Y5,978 million in the cumulative effect of
       accounting changes in the consolidated statement of income.

   6.  Adoption of New Accounting Standards

   Impairment or Disposal of Long-Lived Assets

On April 1, 2002, Sony adopted FAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement establishes a single accounting model for long-lived assets to be disposed of by sale and modifies the accounting and disclosure rules for discontinued operations. The adoption of this statement did not have an impact on Sony's results of operations and financial position.

   FAS No.145, "Rescission of FASB Statements No.4, 44 and 64, Amendment of
   FASB Statement No.13, and Technical Corrections"

In April 2002, the Financial Accounting Standards Board issued FAS No. 145. This statement rescinds certain authoritative pronouncements and amends, clarifies or describes the applicability of others, effective for fiscal years beginning or transactions occurring after May 15, 2002, with early adoption encouraged. Sony elected early adoption of this statement retroactive to the beginning of the fiscal year. The adoption of this statement did not have an impact on Sony's results of operations and financial position.

   Other Consolidated Financial Data

                            (Millions of yen, millions of U.S. dollars)
                                     Three months ended June 30
                           2001          2002        Change         2002
  Capital expenditures
   (additions to fixed
   assets)               Y86,094       Y60,672       -29.5%          $510

  Depreciation and
   amortization
   expenses*              80,045        83,318         +4.1           700
  (Depreciation expenses
   for tangible assets)  (65,540)      (67,051)       (+2.3)         (563)

  R&D expenses           103,150        97,895         -5.1           823

   *  Including amortization expenses for intangible assets and for
      deferred insurance acquisition costs

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SOURCE: Sony Corporation

CONTACT: Investor Relations: Tokyo - Takeshi Sudo, +81-3-5448-2180, or
New York - Yas Hasegawa, +1-212-833-6820, or Chris Hohman, +1-212-833-5011, or
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all of Sony Corporation

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