Sony has reported a 68 per cent fall in annual profits due to production costs incurred by the company following the launch of its latest games console.
The electronics giant said that its operating profit in the 12 months to March 31st fell to 71.75 billion yen (£300 million), down from 226.42 billion yen a year earlier.
Sony blamed the fall on costs associated with the manufacture of its new PlayStation 3 console, which went on sale in November following production delays.
Despite reporting a "significant" increase in sales following the launch of the PS3, Sony said that its game division had been hit by set up costs and a fall in sales for the PlayStation 2 (PS2) and PlayStation Portable (PSP).
Sony, which faces tough competition from Microsoft's Xbox 360 and Nintendo Wii, said that its game business made an operating loss of 232.3 billion yen (£0.97 billion) over the year, in contrast to a profit of 8.7 billon yen (£36 million) for the previous year.
Nonetheless Sony, which was also plagued by a manufacturing glitch which forced it to recall 9.6 million laptop batteries over the year, reported an increase in profits within its electronics business.
Operating profits for electronics grew to 156.7 billion yen (£0.66 billion) compared to 6.9 billion yen (£28.9 million) in the previous year, with the performance of the division boosted by increased sales of Bravia LCD televisions, Vaio personal computers and Handycam video cameras.
Sony also remains upbeat about its future prospects, forecasting an operating profit of 440 billion yen (£1.84 billion) for the year to March 2008, based on a 5.8 per cent growth in expected sales.
"An increase in sales is anticipated as a result of the full-scale expansion of the PS3 business in Japan, the United States and Europe," said Sony in a statement.
"In addition, a significant reduction in operating loss is expected due to rapid reductions in hardware production costs and an enhanced line-up of software titles in the PS3 business," the Tokyo-based company added.