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Sony corp reports lower than expected profit in its business

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Japan’s Sony Corp reported lower-than-expected profit on Friday as its previously thriving gaming business sagged, though a one-off gain related to its acquisition of EMI nevertheless pushed the quarterly result to a record high.

Sony has reinvented itself as an entertainment company with stable revenue from music content and gaming, after battling years of losses with consumer electronics such as television sets that are more susceptible to price competition.

But investors are now looking for the next profit pillar as Sony’s gaming business shows signs of slowing, with its popular PlayStation 4 (PS4) console nearing the end of its lifecycle.

“Hardware sales dropped to 8.1 million units in the quarter, but that’s meeting our expectations for a console entering its sixth year,” Chief Financial Officer Hiroki Totoki said at an earnings briefing.

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Sony said operating profit rose 7.5 percent to 376.99 billion yen ($3.46 billion) in October-December. That compared with the 383.67 billion yen average of 10 analyst estimates compiled by Refinitiv.

Driving the increase was a surge in profit at its music business after completing the $2.3 billion acquisition of EMI late last year to become the world’s largest music publisher.

Profit in the gaming business fell 14 percent as the popularity of exclusive titles such as “Marvel’s Spider-Man” failed to offset shrinking PS4 console sales. “The gaming business, which has been Sony’s profit driver in the last couple of years, is set to peak out ahead of the launch of the next gaming console,” said Ace Securities analyst Hideki Yasuda. “That’s inevitable due to product cycle.”

Sony also cut its profit outlook for imaging sensors, citing weakness in the global smartphone market.

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“We haven’t changed our view that demand for our high-end sensors will increase, or our plans to increase production capacity to the full,” Totoki said. “But we will adjust the timing of the capacity boost depending on demand.”

Sony’s stock price hit an 11-year high in September as investors cheered the firm’s reinvention. However, it has since dropped by a quarter on concerns over gaming and sensors.

Still, Sony maintained its annual profit forecast of 870 billion yen, exceeding an all-time high marked just last year.

Sony’s results came a day after gaming rival Nintendo Co Ltd booked a 36 percent quarterly profit jump on upbeat sales of software for its hybrid home-portable Switch device. The firm, however, cut its full-year forecast for Switch console sales by 15 percent.

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Krishna Mali
Krishna Mali
Founder & Editor of TechGraph.

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