Sony tops profit estimates as chips and music lead growth
tokyo — Sony Corp’s turnaround is right on track.
The Japanese electronics and entertainment company posted quarterly profit that topped analyst estimates, thanks to demand for smartphone camera chips, a healthy music business and brisk sales of PlayStation 4 consoles and games. Operating profit was ¥157.6 billion ($1.4 billion) in the fiscal first quarter that ended in June, beating analysts’ average projection for 133.3 billion yen. Sales rose 15 per cent to 1.86 trillion yen, topping predictions.
After a tumultuous year that included an earthquake that crippled camera-chip production and a $1 billion writedown in films, the latest quarter is a return to stability for chief executive officer Kazuo Hirai. The increasing number of PlayStation 4 owners is driving sales of software and online services, while smartphone makers adopt more camera chips per device and more people pay to stream music. Still, Sony appears to be playing it safe,
Games business was revised up because PS4 sales are still strong and Xbox One X, with its high price, is seen less of a threat David Dai, Analyst at Sanford C. Bernstein & Co
keeping its full-year profit guidance of ¥500 billion, even though it lifted its sales forecast by 3.8 per cent to ¥8.3 trillion.
“Results are good,” said David Dai, an analyst at Sanford C. Bernstein & Co. “But they’re still lowballing their profit outlook, so I would expect to see them continue to beat consensus as well as their own guidance going forward.”
Chief financial officer Kenichiro Yoshida defended the conservative outlook, saying “for one thing, we only had three months in this fiscal year.” Sony decided not to raise its guidance due to “variations of the macro-economic environment, and also cost and demand factors,” he said. The shares of Sony fell 1.8 per cent ahead of the results, leaving them up 36 per cent this year. The Germany-listed shares were down by a similar margin in early Tuesday trading.
During the quarter, Sony finalised the sale of a Chinese subsidiary that produced camera-modules, resulting in a one-time profit of ¥27.5 billion. Declining insurance and recovery costs related to the April 2016 earthquake in Kumamoto also provided a one-time benefit of ¥9.3 billion. Net income was ¥80.9 billion, exceeding the prediction for ¥66.5 billion.
Games, the biggest division by revenue, saw operating profit decline 60 per cent to ¥17.7 billion, while sales rose 5.4 per cent to ¥348.1 billion. The company blamed the sharp profit drop on inflated profits a year ago, when adventure game Uncharted 4 was released. The flagship title went on to become the second-best selling title of the year, according to vgchartz.com.
Despite the profit drop this quarter, Sony upgraded its games profit guidance for the full year by 5.9 per cent and sales by 4.8 per cent. It sold 3.3 million PlayStation 4 units during the quarter, slightly down from 3.5 million last year. The company kept its forecast to sell 18 million units this year unchanged.
“Games business was revised up because PS4 sales are still strong and Xbox One X, with its high price, is seen less of a threat,” Dai said, referring to Microsoft Corp’s recently unveiled new console.
The PlayStation 4 is heading into a late-stage life cycle, usually the most profitable period for consoles as new titles are sold to an increasing installed base of owners. But this cycle is even more lucrative due to Sony’s online gaming service PlayStation Network, which charges users subscription fees to play with others and lets them download games, generating higher margins than selling physical copies. — Bloomberg