Sony Corp. said Thursday its profit for the July-September quarter dropped by nearly half from the same period a year ago, as stumbling electronics sales stayed flat and earnings suffered from a heavier tax burden and losses related to equity holdings.

Sony announced a revival plan last month under Chief Executive Howard Stringer, the first foreigner to head the Tokyo-based manufacturer of the Walkman audio player and PlayStation video game console.

The electronics and entertainment company reported group net profit of 28.5 billion yen (US$246 million; euro204 million) for the three months ended Sept. 30, down 46 percent from 53.2 billion yen the same period a year ago.

Sales for the quarter stayed unchanged at 1.7 trillion yen (US$15 billion; euro12 billion). Sony kept its forecast for the full fiscal year, which runs through March, at a loss of 10 billion yen (US$86 million; euro71.5 million).

Sales were up in Sony's game unit because of healthy demand for the PlayStation Portable, or PSP, handheld machines, but results were shakier in the company's core electronics unit. Rising sales of liquid-crystal display TVs and camcorders failed to offset falling sales of plasma TVs and digital cameras, as well as lower prices of LCD TVs, Sony said in a statement.

Also weighing on Sony's results were higher corporate tax payments, totaling 65 billion yen (US$561 million; euro465 million) in additional expenses.

John Yang, equity analyst with Standard & Poor's in Tokyo, said he wasn't quite convinced that Sony was turning itself around, with its chips and LCD TV businesses still struggling, despite a better showing with the PSP and camcorders.

"That's not going to save the day for Sony," he said, adding that he foresees tough times for Sony in the second half. "If Sony wants to be a player, all of Sony has to do well."

Sony said it also took special losses for its equity holdings in a liquid crystal display panel with Samsung Electronics Co. Also hurting earnings were losses related to its acquisition of movie studio Metro-Goldwyn-Mayer Inc., as well as those linked to its investment in its music division Sony BMG Music Entertainment, which was formed after Sony's music unit combined with German media company Bertelsmann AG's BMG label.

Like other Japanese electronics makers, Sony has been struggling in the last several years amid falling prices in consumer electronics and the emergence of cheaper Asian rivals.

Sony fell behind Apple Computer Inc.'s iPod in portable music players. It was also late in putting out flat-panel TVs, falling behind Japanese rivals Matsushita Electric Industrial Co. Ltd., which makes Panasonic brand products, and Sharp Corp.

Although Sony's sales were largely flat in electronics, its operating income was improved from a year ago because of a return of pension payments from the government, under new Japanese regulations.

In Sony's gaming unit, sales shot up 79 percent to 214 billion yen (US$1.8 billion; euro1.5 billion) from 120 billion yen a year earlier, on the back of healthy demand for the PSP, which went on sale this year, as well as the older PlayStation 2 home console, Sony said. Some 3.75 million PSP machines were shipped worldwide during the quarter.

Sales in Sony's movies division declined 17 percent for the quarter because of the absence of revenue from the hit "Spider-Man 2" which had boosted earnings the previous year. The disappointing performance of this year's "Stealth" hurt Sony Pictures Entertainment, sending it into an operating loss.

Sony also recorded robust results in its financial services business, mainly because of better sales at Sony Life, an insurer, with revenue up 40 percent and operating income more than doubling.

Mitsuhiro Osawa, analyst with Mizuho Investors Securities in Tokyo, said Sony appeared to be holding up OK with its latest products that reflect its turnaround effort, but cautioned that the big battle is still ahead during the Christmas shopping season.

Sony shares, which rose earlier this year to 4,000 yen (US$34.5; euro29) levels has since settled down to about the same level they were a year ago, closed at 3,730 yen (US$32; euro27), down nearly 1 percent on the Tokyo Stock Exchange. Sony announced earnings after trading ended.

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