BW20030423002053 20030423T135738Z UTC
( BW)(SONY-CORP.)(SON) Final Results
Business Editors
UK REGULATORY NEWS
TOKYO--(BUSINESS WIRE)--April 23, 2003--
Subsidiary Tracking Stock
Sony Communication Network Corporation
Financial Results for Fiscal Year 2002
Sony Communication Network Corporation (hereinafter, the "SCN Group"),
a subsidiary the performance of which is linked to a tracking stock
issued by Sony Corporation, announced today its consolidated results
for the fiscal year ended March 31, 2003 (the period from April 1,
2002 to March 31, 2003). These results are based on the generally
accepted accounting standards of Japan.
-- FY2002 Results: Increased Revenue, Increased Profitability
Sales were 38,795 million yen. Operating income of 472 million yen,
ordinary income of 96 million yen, and a net loss of 16 million yen
were recorded.
-- So-net Subscribers Total 2.3 million
An increase of 60,000 over the previous fiscal year end total of 2.24
million.
-- Within the Total, 420,000 Broadband Subscribers
The number of broadband users reached 420,000, mainly for ADSL, an
increase of 230,000 over the previous fiscal year end.
-- Strengthening Cooperation with the Sony Group
Sales start of broadband AV router "HN-RT1" aimed at So-net
subscribers. Japanese version of online game "EverQuest" released.
Implementation of special subscriber discounts with My Sony Card.
-- FY03 Forecast: Higher Sales, Lower Profits due to Subscriber
Acquisition Costs
For FY03, the SCN Group expects sales to increase 10.8% to 43,000
million yen, stemming from an increase in the proportion of broadband
subscribers. As for profitability, reflecting an expected increase in
subscriber acquisition costs, the SCN Group expects an operating loss
of 1,700 million yen, an ordinary loss of 1,900 million yen, and a net
loss of 1,300 million yen. This is based on a forecast of 2.4 million
subscribers at the end of FY03. Within this total, the target is to
more than double the number of broadband subscribers.
Results for the Twelve-month Period Ended March 31, 2003
----------------------------------------------------------------------
(Millions of Yen)
Year ended March 31
2002 2003 Change (%)
Sales YEN YEN
33,151 38,795 +17.0
Operating income (loss) (1,707) 472 --
Ordinary income (loss) (2,559) 96 --
Net income (loss) (2,101) (16) --
Summary of Consolidated Operations
The number of Internet users in Japan reached 30 million in March
2003. Within that total, the number of broadband users passed 9.3
million, including ADSL, FTTH, and CATV. Narrowband users, mostly
using dial-up connections, was in a declining trend. (Data according
to the Ministry of Public Management, Home Affairs, Posts and
Telecommunications.) In this business environment, the SCN Group
strengthened its broadband connection services and broadband content
services. The SCN Group also enriched its other value-added service
offerings including virus-checking and web mail. Also, the SCN Group
worked to further strengthen its cooperation with the Sony Group,
including the sales release of a broadband AV router aimed at
subscribers and the release of the Japanese version of the massively
multiplayer online game "EverQuest." Furthermore, the SCN Group
implemented active measures to increase the number of subscriber
acquisition through sales promotions at convenience stores and rental
shops. As a result of severe market competition, at the end of March
2003, the number of So-net subscribers had reached 2.3 million, and
within this total, the number of broadband users was about 420,000
(including users of such services as "Flets" which is operated by
regional NTT East and NTT West Corporations).
Under these conditions, sales for the SCN Group for the year ended
March 31, 2003 increased 17.0% to 38,795 million yen, compared with
sales of 33,151 million yen in the year earlier period. This stemmed
from an increase in the number of So-net subscribers, a shift towards
broadband, and sales increases at subsidiaries. Factors impacting
profitability included, as well as the increase in sales connected
with the rise in broadband subscribers, cost reductions for
communication lines usage, improved profitability at consolidated
subsidiaries, and control of increases in fixed costs. As a result,
the SCN Group was able to record operating income of 472 million yen,
compared with an operating loss of 1,707 million yen in the year
earlier period. Furthermore, equity losses of 437 million yen were
recorded for the two affiliated companies accounted for by the equity
method, Label Gate Co., Ltd. and DeNA Co., Ltd., compared with equity
losses of 633 million yen in the year earlier period. This resulted in
ordinary income of 96 million yen during the year under review,
compared with an ordinary loss of 2,559 million yen in the year
earlier period. Impacting net income, although there were increase in
losses from revaluation of investments in other securities and an
one-time loss on service integration and re-examination, corresponding
with the merger of SCN and So-net BeMedia Corp. (hereinafter "SBM")
SCN utilized part of SBM's loss carryforwards as a tax benefit. As a
result, during the year under review, net loss was 16 million yen,
compared with a net loss of 2,101 million yen in the year earlier
period.
Sales by Category
Fiscal year ended March 31, 2003
Year ended Year ended Year-
March 31, Percentage March 31, Percentage on-
2002 of total 2003 of total year
(millions (%) (millions (%) change
of yen) of yen) (%)
----------------------------------------------------------------------------------------
Operating revenue Internet
provider
services 27,306 82.4 32,245 83.1 18.1
-----------------------------------------------------------
Internet-
related
services 5,242 15.8 5,161 13.3 (1.5)
----------------------------------------------------------------------------------------
Merchandise sales 604 1.8 1,389 3.6 130.1
----------------------------------------------------------------------------------------
Total 33,151 100.0 38,795 100.0 17.0
----------------------------------------------------------------------------------------
The quarter ended March 31, 2003
Quarter Quarter Year-
ended Percentage ended Percentage on-
March 31, of total March 31, of total year
2002 (%) 2003 (%) change
(millions (millions (%)
of yen) of yen)
----------------------------------------------------------------------------------------
Operating revenue Internet
provider
services 7,603 84.4 7,762 81.8 2.1
-----------------------------------------------------------
Internet-
related
services 1,251 13.9 1,355 14.3 8.3
----------------------------------------------------------------------------------------
Merchandise sales 156 1.7 371 3.9 137.1
----------------------------------------------------------------------------------------
Total 9,010 100.0 9,488 100.0 5.3
----------------------------------------------------------------------------------------
ISP services
In this category, the SCN Group enhanced its broadband-focused
services, including ADSL and FTTH, as well as wireless services. The
SCN Group also worked to introduce valued-added connection services
such as virus-checking and web mail.
-- Connection Services
-ADSL (high-speed, expanded area)
-12M (October 2002)
-Establishment of over 200 access points in FY02
-FTTH (expanded cooperation with carriers)
-So-net Hikari (TEPCO) (May 2002)
-Cooperation with the USEN Group (December 2002)
-Wireless LAN (service start)
-M Flets, Flets Spot (NTT East and West) (July 2002)
-GRIC Wireless (roaming) (December 2002)
-- Valued-added Connection Services
- Web mail (July 2002)
- Mail virus check (April 2002)
- IP v6 test (November 2002 - April 2003)
- Expansion of homepage functionality (July 2002)
- So-net Phone (February 2003)
As a result, reflecting rise in revenue per subscriber caused by an
increase in the proportion of broadband subscribers, sales of ISP
services for the year ended March 31, 2003 were 32,245 million yen, an
increase of 18.1% compared with the year earlier period. Such sales
accounted for 83.1% of total sales.
Internet-related services
In this category, the SCN Group worked to efficiently manage its
content offerings through concentration and selection, while actively
developing and introducing broadband contents.
-- PostPet V3
- Win OpenGL/Mac version releases (December 2002)
- Hybrid version release (March 2003)
-- So-net TV (December 2002)
- Start of TV-like streaming channel
-- EverQuest (massively multiplayer online role-playing game)
- Official service start (February 2003)
-- So-net TV & So-net Channel Integration
- One-source multi-use original contents (Internet and CS broadcasting)
Furthermore, sales of consolidated subsidiaries (excluding sales
related to Merchandise sales) are included in this category. Overall,
sales in this category decreased 1.5% compared with the year earlier
period to 5,161 million yen. This was a result of a decrease in sales
stemming from the design of authentication and settlement systems.
Sales in this category accounted for 13.3% of total sales.
In this category, sales of PlayStation 2 broadband units, Sony
"HN-RT1" broadband AV routers, and CS-broadcast receivers were strong.
Also due to sales of "PostPet V.3" software, sales in this category
during the year under review increased by 130.1% compared with the
year earlier period to 1,389 million yen. Such sales accounted for
3.6% of total sales.
Results of Consolidated Subsidiaries and of Affiliated Companies
Accounted for by the Equity Method
The SCN Group includes the following four consolidated subsidiaries:
So-net Sports.com Corp., So-net M3 Inc., Skygate, Co., Ltd., and
Drivegate Inc., and two affiliated companies accounted for by the
equity method: Label Gate Co., Ltd. and DeNA Co., Ltd. During the year
under review, equity in net losses of affiliated companies of 437
million yen was recorded, compared with 633 million yen in the year
earlier period. Among these companies, during the year under review,
So-net M3 Inc. recovered from its accumulated deficit. It smoothly
increased its operating results by expanding the employment business
of "MR-kun" while merging with the SCN-operated "Medipro" business and
working to expand its medically-related businesses. On the other hand,
So-net Sports.com Corp. and Skygate, Co., Ltd. continued to be in an
unprofitable condition. Furthermore, in regards to Drivegate Inc.,
which operates a site related to used automobiles, the dissolution of
the alliance at the end of April 2003 with Hanaten Co., Ltd., Hanaten
Net Co., Ltd., and Hyogo Auto Co., Ltd. as well as with Nigensha Inc.
is planned, and Drivegate Inc. is expected to carry out a
re-examination of its business as a 100% subsidiary of the SCN Group.
(Please refer to the below "(5) Other Matters, Including Important
Items from a Management Perspective," under "Strategy and Outlook.")
Also, So-net Be Media Corp. was merged with SCN as of January 1, 2003.
Cash Flow
Cash and cash equivalents were 3,384 million yen at March 31, 2003,
which was a decrease of 1,257 million yen compared with the end of the
year earlier period. During the year under review, the SCN Group
generated 2,077 million yen of cash from operating activities, used
1,993 million yen of cash in investing activities, and used 1,340
million yen of cash in financing activities.
During the year ended March 31, 2003, regarding cash flows from
operating activities, the SCN Group generated 2,077 million yen, a
significant improvement over the year earlier period, when the SCN
Group used 368 million yen. This was mainly due to the recording of
net loss before income taxes of 269 million yen during the period,
compared with a loss of 2,554 million yen in the year earlier period.
During the year ended March 31, 2003, regarding cash flows from
investing activities, the SCN Group used 1,993 million yen, while
during the year ended March 31, 2002, the SCN Group used 3,127 million
yen. Factors influencing cash flows from investing activities during
the year under review included outlays of 1,134 million yen for
purchase of investment securities including those of U's
Communications Corp., compared with 1,496 million yen for acquisition
of Web Online Networks, Ltd., during the year earlier period, 620
million yen for acquiring intangible assets such as connection service
and e-commerce related systems, compared with 792 million yen during
the year earlier period, and 271 million yen for loans to related
companies, compared with 394 million yen during the year earlier
period.
During the year ended March 31, 2003, regarding cash flows from
financing activities, the SCN Group used 1,340 million yen, while
during the year ended March 31, 2002, the SCN Group generated 7,676
million yen. During the year under review, this reflected the
repayment of short and long-term debt to Sony Corp.
For inquiries, please contact:
Sony Corp, IR Department
7-35, Kita-Shinagawa 6-chome Shinagawa-ku, Tel: (03) 5448-2180
Condensed Consolidated Statements of Income
For the year ended March 31, 2003
(Millions of yen)
------------------------------------------------------------------------------------------------------------------------
Year ended March 31
2002 2003 Change
------------ ------------ ------
Sales 33,151 38,795 17.0%
Cost of sales 19,753 22,725
Gross profit 13,398 16,070
Selling, general and administrative expenses 15,105 15,598
Operating income (loss) (1,707) 472 --%
Non-operating income 69 117
Non-operating expenses
Equity in net loss of affiliated companies 633 437
Other 287 920 57 493
Ordinary income (loss) (2,559) 96 --%
Extraordinary gain
Gain on issuances of stock by
equity investee 97 0
Reversal of allowance for bad debt 9 106 -- 0
Extraordinary loss
Extraordinary depreciation of fixed assets 60 --
Loss on issuance of stock by equity investee 2 --
Revaluation of investments in other securities 39 251
Loss from lease cancellation due to service integration and re-examination -- 101 114 365
Net income (loss) before income taxes (2,554) (269) --%
Income tax current 104 128
Income tax deferred (256) (152) (332) (204)
Minority interest loss 302 49
Net income (loss) (2,101) (16) --%
For the three-months ended March 31, 2003
(Millions of yen)
------------------------------------------------------------------------------------------------------------------------
Three-months ended March 31
2002 2003 Change
---------- ----------- ------
Sales 9,010 9,488 5.3%
Cost of sales 5,461 5,730
Gross profit 3,549 3,758
Selling, general and administrative expenses 3,901 4,259
Operating income (loss) (351) (501) --%
Non-operating income 22 55
Non-operating expenses
Equity in net loss of affiliated companies 143 163
Other 227 369 (9) 154
Ordinary income (loss) (698) (599) --%
Extraordinary gain
Reversal of allowance for bad debt 9 --
Extraordinary loss
Loss on issuance of stock by equity investee 2 --
Revaluation of investments in other securities 39 251
Loss from lease cancellation due to service integration and re-examination -- 41 114 365
Net income (loss) before income taxes (731) (964) --%
Income tax current 29 (341)
Income tax deferred (92) (62) (310) (651)
Minority interest loss 74 21
Net income (loss) (594) (293) --%
Condensed Consolidated Balance Sheets
(Millions of yen)
------------------------------------------------------------------------------------------------------------------------
March March
31 31
ASSETS 2002 2003 Change
------- ------- -------
Current assets 9,408 8,594 (814)
------- ------- -------
Cash and bank deposit 523 517 (6)
Notes and account receivable, trade 3,962 3,803 (159)
Inventories 64 278 214
Deposits in parent company 4,118 -- (4,118)
Deposits in Sony group company -- 2,867 2,867
Deferred tax assets 401 472 72
Other 369 704 335
Allowance for bad debt (28) (47) (19)
Noncurrent assets 4,789 5,458 669
------- ------- -------
Property, plant and equipment 456 349 (107)
------- ------- -------
Furniture and fixtures 325 232 (92)
Other 131 116 (15)
Intangible assets 2,724 2,465 (258)
------- ------- -------
Software 1,108 1,141 33
Goodwill 1,275 1,104 (171)
Other 341 220 (120)
Investment and other assets 1,609 2,644 1,035
------- ------- -------
Investment in affiliates and others 833 1,618 785
Deferred tax assets 222 498 276
Other 554 527 (26)
------- ------- -------
Total assets 14,197 14,051 (146)
------- ------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities 5,460 5,880 420
------- ------- -------
Account payable, trade 1,963 2,428 464
Current portion of long-term borrowing from parent
company 1,200 800 (400)
Accrued expense 1,693 1,889 196
Accrued income taxes 130 127 (3)
Accrued bonuses 242 217 (25)
Other 232 419 188
Long-term liabilities 869 94 (775)
------- ------- -------
Long-term borrowing from parent company 800 -- (800)
Accrued severance costs for employees 41 65 23
Accrued severance indemnities for directors 16 29 13
Other 12 -- (12)
Total liabilities 6,329 5,974 (355)
------- ------- -------
Minority interest (213) 33 247
------- ------- -------
Common stock 5,246 5,246 --
Additional paid-in capital 4,765 4,765 --
Retained earnings (accumulated losses) (1,945) (1,961) (16)
Unrealized exchange gains (losses) of investment securities 16 (6) (22)
------- ------- -------
Total stockholders' equity 8,081 8,044 (38)
------- ------- -------
Total liabilities and stockholders' equity 14,197 14,051 (146)
------- ------- -------
Consolidated Statements of Additional Paid-in Capital and Retained
Earnings and Accumulated Losses
(millions of yen)
----------------------------------------- ----------------- -------
Year Year
ended ended
Item March March
31, 31,
2002 2003
----------------------------------------- ----------------- -------
Additional Paid-in Capital
Balance at the beginning of the year - 4,765
Increase
New share issuance 4,765 -
Balance at the end of year
4,765 4,765
---------------- -------
Retained Earnings (Accumulated Losses)
Balance at the beginning of the year 156 (1,945)
Increase
Net loss 2,101 16
Balance at the end of year (1,945) (1,961)
Consolidated Statements of Cash Flow (Millions of
Year ended
March 31
2002 2003
------- ------
I. Cash flows from operating activities
Net Loss before income taxes (2,554) (269)
Depreciation and amortization 892 773
Extraordinary depreciation of fixed assets 60 --
Amortization for goodwill 189 311
Gain on issuances of stock by consolidated subsidiary
and equity investee (97) (0)
Loss on issuance of stock by equity investee 2 --
Equity in net losses of affiliated companies 633 437
Revaluation of investments in other securities 39 251
Increase (decrease) in accrued bonuses 38 (25)
Increase in accrued severance costs for employees 18 23
Increase in accrued severance indemnities for directors 16 13
Increase (decrease) in allowance for bad debt (8) 19
Interest and dividend income (8) (8)
Interest expenses 8 7
Loss on disposal of tangible fixed assets 83 47
Loss on sales of tangible fixed assets 17 --
(Increase) decrease in account receivable, trade (314) 184
(Increase) decrease in inventories 120 (214)
(Increase) decrease in other current assets 54 (141)
Increase in accounts payable, trade 590 460
Increase in accrued expenses 260 176
Increase (decrease) in other current liabilities (20) 161
------- ------
Sub Total 16 2,207
------- ------
Receipt of interest 8 8
Payments for interest (8) (7)
Payments for income taxes (384) (131)
------- ------
Net cash provided by (used in) operating activities (368) 2,077
------- ------
(Millions of
yen)
----------------
Year ended March
31
2002 2003
------- -------
II. Cash flows from investing activities
Payment for securities investment (203) (1,134)
Payment for acquisition of fixed assets (124) (51)
Proceeds from sales of fixed assets 3 7
Payment for acquisition of intangible assets (792) (620)
Proceeds from sales of intangible assets 1 20
Payment for deposits (20) (43)
Proceeds from deposits -- 101
Payments for long term prepaid expenses (86) (32)
Net cash increase resulting from acquiring subsidiary -- 30
Net cash decrease resulting from acquiring subsidiary (1,496) --
Payments for acquisition of subsidiaries' stock held by
minority shareholders (16) --
Payments for loan (394) (271)
------- -------
Net cash used in investing activities (3,127) (1,993)
------- -------
III. Cash flows from financing activities
Decrease in short-term borrowing (1,872) (140)
Payments of long term debt -- (1,200)
Proceeds from issuances of stock to minority shareholders 19 --
Proceeds from issuances of stocks 9,529 --
------- -------
Net cash provided by (used in) financing activities 7,676 (1,340)
------- -------
IV. Effect of exchange rate difference on cash and cash equivalents -- --
V. Increase (decrease) in cash and cash equivalents 4,181 (1,257)
VI. Cash and cash equivalents at beginning of year 483 4,641
VII. Decrease in cash and cash equivalents resulting from
deconsolidation (24) --
------- -------
VIII. Cash and cash equivalents at end of the period 4,641 3,384
======= =======
(Notes) 1. Consolidated financial statements of the SCN Group are
based on the standards conforming with the Generally Accepted
Accounting Principles in Japan.
2. While the cash previously deposited in Sony Corp. was recorded
under "Deposit in parent company" on the Consolidated Balance Sheet,
it is recorded as "Deposit in Sony group company" in this fiscal year
because the cash is deposited in Sony Global Treasury Services PLC
from December 1, 2002. Furthermore, both "Deposit in parent company"
and "Deposit in Sony group company" are included in "Cash and cash
equivalents" on the Consolidated Statements of Cash Flow.
(For reference)
(millions of yen)
Year Year
ended ended
March March
31, 31, Change
2002 2003 (%)
Increase in fixed assets 161 44 (72.5)
Increase in intangible assets 963 562 (41.6)
Depreciation of fixed assets* 253 133 (47.5)
Amortization of intangible assets 676 602 (10.9)
R&D expenses -- -- --
Three- Three-
months months
ended ended
March March
31, 31, Change
2002 2003 (%)
Increase in fixed assets 33 11 (67.7)
Increase in intangible assets 239 124 (47.9)
Depreciation of fixed assets* 50 34 (31.5)
Amortization of intangible assets 173 142 (17.9)
R&D expenses -- -- --
*Including extraordinary depreciation of fixed assets
Strategy and Outlook
(1) Basic management aims
Since starting Internet connection services under the name of "So-net"
in January of 1996, the SCN Group has strived to offer a new style of
network services. The SCN Group offers various services including a
gratifying communications environment and uniquely appealing contents.
Going forward, aiming towards the creation of corporate value and new
growth in the 21st century, the SCN Group has raised up since October
2002 its new slogan "Sony Fun Broadband," based on a recognition of
the importance of strengthening cooperation within the Sony Group in
the Internet market that is continuing to expand. This expresses the
intention of the SCN Group to offer customers services including Sony
Group electronic devices and game, music, pictures, and financial
services in a broadband Internet environment that is truly always
connected. This is the SCN Group management's basic aim.
(2) Basic strategy for distribution of earnings
In order to strengthen the corporate foundation and to respond to the
quickly expanding Internet market, the SCN Group is actively expanding
its businesses, including investment for the establishment of
subsidiaries, corporate investment, and alliances. Looking forward, it
is expected that dedicated-line broadband Internet access will further
spread. The SCN Group believes that it can work to manage its
operations by readying businesses that respond to these trends, by
expanding cash flow, and by fully solidifying its financial base and
utilizing retained earnings. For these reasons, for the time being,
the SCN Group does not plan to distribute earnings to SCN
shareholders.
(3) Current challenges
In a business environment in the Internet world that is shifting
towards dedicated-line broadband connections, the SCN Group is working
to increase the satisfaction of customers and is striving to make the
advance of broadband its most important challenge.
a) ISP services
SCN connection services include a variety of user offerings such as
dial-up connections, wireless, ADSL, and FTTH. In the area of FTTH
services which are particularly expected to spread in the future, the
SCN Group is cooperating with NTT, TEPCO, Chubu Electric, and U's
Communications Corp. By offering a wide selection in terms of area,
residential departmentalization, and charges, the SCN Group intends to
even further expand its subscriber base. Also, the SCN Group
continuously implements an expansion of routes for acquiring new
subscribers at convenience stores and rental shops, and has
established a subscriber-only discount service based on "My Sony
Card."
b) Content and services
By cooperating with the Sony Group, the SCN Group aims to develop and
offer contents and services focused on broadband. For content and
services, the SCN Group is striving to increase the revenue and
profitability of content by constructing a business model that
integrates content, e-commerce, and advertising in a way that fully
takes into account the degree of use, profitability, and page views.
c) Cooperation with the Sony Group
The SCN Group is working to cooperate with the Sony Group in terms of
Sony electronic devices and "So-net" connection services and payment
and settlement platforms. The SCN Group intends to deepen cooperation
with the Sony Group, as will be reflected in new products and
services. Already, the SCN Group established in December of 2002 an
office within SCN, "Business Development and Group Alliances," that is
striving to strengthen cooperation with the Sony Group.
d) Investment aims
The SCN Group is seizing the challenge to focus on investments in
content and services aimed at dedicated-line broadband. The SCN Group
aims to carry out investments for the planning and development of
content and services, their procurement and aggregation, and the
acquisition of distribution rights, whether internally, by
subsidiaries, or by affiliated companies.
(4) Fundamental policies regarding corporate governance and related
measures, implementation
In regards to the corporate governance of the SCN Group, the basic
aims of the Sony Group are as follows. The SCN Group is a subsidiary
the performance of which is linked to a tracking stock issued by Sony
Corporation. As a subsidiary of Sony Corporation, which in actuality
has 100% of the voting rights, matters at the SCN Group's General
Shareholders' Meeting are all controlled by Sony Corporation.
Furthermore, through the directors' nominations at the General
Shareholders' Meeting, Sony Corporation indirectly controls the board
of directors of the SCN Group. On the other hand, the directors of
Sony Corporation have a fiduciary duty to Sony Corporation and bear a
responsibility to work to maximize the corporate value of Sony
Corporation, which includes the SCN Group and the other individual
companies of the Sony Group. In view of the definition of the SCN
Group as within the Sony Group, measures to maximize the corporate
value of Sony Corporation and measures to maximize the corporate value
of the SCN Group can be thought of as parallel in many cases. However,
in situations where within the Sony Group there is the possibility of
competition with the SCN Group as well as cases where the supply of
the Sony Group's limited management resources is to those businesses,
then it cannot be denied that there is the possibility that there will
be cases where the interests of the overall Sony Group and the
interests of the SCN Group are not parallel. In such a case, as a
result of working to maximize the corporate value of the overall Sony
Group including the SCN Group.
i) Basic management aims of the Sony Corporation Board of Directors
-- Indicators of management judgment
One role of the Board of Directors of Sony Corporation is to
coordinate the interests within the Group and carry out management
judgment to maximize corporate value of the overall Sony Group. When
the case arises that the interests of the SCN Group and another
subsidiary or business unit of Sony Corporation are in conflict, then
it is the aim to carry out an appropriate decision that maximizes the
corporate value of the Sony Group and does not unreasonably harm the
interests of the shareholders.
-- Distribution of business opportunities and management resources,
dealing with competing businesses
When carrying out the distribution of business opportunities and
management resources within the Group, the Board of Directors of Sony
Corporation aims to carry out appropriate management decisions,
examining whether to distribute to the SCN Group or another Group
business so that the interests of the entire Sony Group can be
increased. Furthermore, in the development of future businesses, in
the case that there exists businesses within the group where their
operations replicate that of the SCN Group, and that it is thought
that the competition is having a major impact on the corporate value
of the entire Sony Group, then the board of directors and the
management entities involved will work to properly adjust the matter.
-- Matters for Sony Corporation's Prior Approval
As for matters relating to SCN management, the SCN Board of Directors
carries out decisions of its intentions, but for important matters
relating to the management of the entire Sony Group, before the SCN
Group carries out its operational intentions, it must get the approval
of Sony Corporation. For example, matters which fall under this
category include something which greatly affects the corporate value
of the Sony Group, where there is necessary close cooperation with
Sony Corporation or a Sony Group business, or when there is concern
that something will be contrary to profitability within the Group.
ii) Relationship of Sony Corporation and the SCN Group
-- Dividend policy of the SCN Group
Under the set terms of the articles of incorporation, Sony Corporation
may pay a dividend for the tracking stock where the dividend amount is
that which the SCN Group Board of Directors has proposed as a
distribution of the SCN Group's profits. The dividend policy of the
SCN Group is decided by the SCN Group's Board of Directors. The
approval beforehand of Sony Corporation is not necessary.
-- Disclosure of the SCN Group
As long as the subsidiary tracking stock is listed, Sony Corporation
plans to disclose the financial information of the SCN Group each
quarter, while also disclosing the financial accounts of the SCN Group
in Sony Corporations's Yuka Shoken Hokokusho and Hanki Hokokusho
(annual and first-half financial reports), as is in accordance with
the law.
iii) Summary of implementation of measures relating to corporate
governance of the SCN Group The SCN Group, as a corporation which has
adopted the auditing system, has four outside directors, and four
elected outside auditors. The outside directors include three from
Sony Corporation and one from Sony Music Entertainment (Japan) Inc.
The outside auditors include two from Sony Corporation, one from Sony
Music Entertainment (Japan) Inc., and one from Sony Finance
International, Inc. Also, the executive officer system has been
introduced within the SCN Group, and in total there are eight
officers. Within those are three directors who serve concurrently as
executive officers, and five who are full-time executive officers.
(5) Other Matters, Including Important Items from a Management
Perspective
Regarding Drivegate Inc., which is a joint venture company with
Hanaten Co., Ltd., Hanaten Net Co., Ltd., and Hyogo Auto Co., Ltd.
(hereinafter, the "Hanaten Group"), as well as with Nigensha Inc., at
a meeting of the SCN's Board of Directors held on April 21, 2003, the
SCN Group decided to dissolve the joint venture to carry out a review
of this used-car related business. The three companies have agreed
that all of the stock held by the Hanaten Group and Nigensha Inc. will
be transferred to the SCN Group, and as of April 30, 2003, Drivegate
Inc. will become a fully-owned subsidiary of the SCN Group.
Furthermore, as for the SCN Group in the future, it intends to carry
out within the first half of the year ending March 31, 2004 an
examination regarding the continuation of the business, including the
advertising business for offering used car information over the
Internet, and the ASP service of used cars search system, and customer
support. The impact of the cancellation of the tie-up on consolidated
earnings for the year ending March 31, 2004 is expected to be slight.
(6) Regarding compulsory retirement of the subsidiary tracking stock
or the compulsory conversion into common stock of the parent company
(Sony Corporation)
At the present time, unless there are significant changes in the
direction of the corporate strategy of the entire Sony Group or in the
way that the SCN Group is defined within the Sony Group, or unless
there are significant changes in a business environment which includes
a variety of factors such as the growth of the SCN Group, there are no
plans to carry our compulsory retirement or conversion into common
stock three years after the issuance of the subsidiary tracking stock,
that is to say, on June 20, 2004.
(7) Forecast of Consolidated Results
Regarding the forecast of the consolidated results for the fiscal year
ending March 31, 2004, the SCN Group announces the following:
(millions of yen)
Consolidated Results Change
from
previous
year
------------------------------------------------------------------------------------------------------- ---------
Sales 43,000 +10.8%
Operating income (loss) (1,700) ---
Ordinary income (loss) (1,900) ---
Net income (loss) (1,300) ---
The above forecast takes into account the following expected factors:
-- It is expected that the number of So-net Group subscribers at the
end of the year ending March 31, 2004 will be 2.40 million, an
increase over the year earlier period of 100,000.
-- Within the above total, the current number of broadband subscribers
is targeted to more than double.
-- Regarding sales by category: (change
from
previous
year)
ISP services 34,500 +7.0%
Internet-related services 6,700 +29.8%
Merchandise sales 1,800 +29.6%
-- Costs for the acquisition of new subscribers are expected to be
about 3,000 million yen.
Cautionary statement:
Statements made in this release with respect to Sony Communication
Network's ("SCN") current plans, estimates, strategies and beliefs and
other statements that are not historical facts are forward-looking
statements about the future performance of SCN. These statements are
based on management's assumptions and beliefs in light of the
information currently available to it. Therefore, SCN 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.
Short Name: Sony Corp.
Category Code: FR
Sequence Number: 00004213
Time of Receipt (offset from UTC): 20030423T133237+0100
--30--mh/uk*
CONTACT: Sony Corporation
KEYWORD: UNITED KINGDOM JAPAN INTERNATIONAL EUROPE ASIA PACFIC
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS
ELECTRONIC GAMES/MULTIMEDIA HARDWARE
SOURCE: Sony Corp.
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