Sony said Thursday that Q1 income skyrocketed despite PlayStation 3 costs, as the games division posted an expected loss.

For the quarter ended June 30, sales in the games segment shot up 60.5 percent to $1.6 billion primarily due to sales from PlayStation 3. The Tokyo-based firm said unit sales of PS2 and PSP rose, as overall software sales increased.

Despite the rise in sales, the games segment posted an operating loss of $237 million for the quarter. The loss came from Sony strategically pricing the PS3 lower than its production cost.

However, during a conference call Sony executive VP Nobuyuki Oneda said the firm may be able to break even on PS3 hardware yet this year, after the Cell, RSX graphics chip and Blu-ray optical components decrease in cost.

“The removal of the negative margin will be when all of these factors have come out. Maybe, marginally, we could achieve this during this year,” Oneda said. He still couldn’t specify exactly when this may happen.

During the quarter, Sony sold 710,000 PS3s, 2.14 million PSPs and 2.7 million PS2s. The latter two were up 730,000 and 370,000 units year-over-year, respectively.

On the software front, PS3 software sold 4.7 million units during the quarter, PSP sold 9.9 million units of software (up by 600,000) and PS2 sold 31.1 million (down by 1.6 million).

70 percent of sales in the division came from hardware and accessories.

The firm said in a conference call that PSP sales have increased since the price drop in North America and Europe.

The company reiterated that it would have 200 disc-based PS3 games coming to retail this year worldwide.

The firm also recorded inventory of $1.85 billion in the games segment for the quarter, an 86 percent year-over-year increase. Sony attributed the high inventory figure to “the buildup of finished goods inventory following the introduction of the PS3 platform in Japan, North America and Europe.”

Sony’s overall revenues were up 13 percent to $16 billion, while operating income was up 267 percent to $808 million.

Net income was up 106 percent to $540 million.

Sales were driven by Bravia LCD TVs, Handycam video cameras and Cyber-shot digital cameras.

The company maintained its previous guidance for fiscal 2008, which ends in March.

Sony also said that it has changed method of disclosing unit numbers. The firm will now disclose figures for hardware and software according to the selling numbers, or the number of products being sold to retail and other outlets. Previously, the firm went by production shipment numbers.