Sony the Japanese electronics giant who has undergone a major restructuring in Australia, got a big leg up from James Bond in the last quarter with the Company reporting a $1.4B surge in profits.
Chief Executive Officer Kazuo Hirai said that a shift away from its consumer hardware roots was paying off for the Company, who was forced to move into smaller digs in North Sydney despite a major refurbishment of their North Ryde office.
Both the James Bond film “Spectre” and record-breaking sales of Adele’s “25,” which wasn’t available on streaming services Spotify and Apple Music contributed to the result.
Games, its biggest division by sales, sold more PlayStation 4 consoles and software titles to help offset a plunge in sensor orders from smartphone customers such as Apple and Samsung.
“Games, music and movies are now in a position to help out when the electronics business isn’t doing well,” said Yoshihiro Nakatani, a senior fund manager at Asahi Life Asset Management. “From the credit market point of view, Sony has become a solid investment.”
In Australia Sony outsourced their high end HI Fi sales to Melbourne based Audio Active. They have also moved to rationalise their consumer electronics offering with the Company witnessing success from their headphone range after JB HI Fi moved to rationalise their range with several brands including Monster headphones being dropped.
Sony has relied on image sensors to bolster profits while Hirai shifted focus away from consumer electronics such as TVs where Sony is still struggling.
Sony has increased projections for games on higher network sales while cutting expectations for the devices unit that produces image sensors.
Home entertainment and sound: Operating income grew 19.8 percent to $260 million even though HE&S sales were down 4.3 percent to $3.35 billion.
Mobile phones: Profits rose 133.2 percent to $201 million though sales were down by 14.7 percent to $3.2 billion.
Imaging: Operating income grew 20.5 percent to $197 million though sales were down 5 percent to $1.6 billion. The segment includes consumer and professional products.
Pictures: Operating income grew 227.4 percent to $170 million on a revenue gain of 26.9 percent to $2.2 billion.
Music: Operating income grew 5.7 percent to $228 million on a revenue gain of 8.2 percent to $2.2 billion.
Semiconductors/components: The segment posted an operating loss of $97 million compared to a year-ago operating income.
Financial services: A 2.7 percent gain in operating income to $435 million came on a 5.6 percent revenue gain to $2.7 billion.
Game Sales
Gaming operating income will be 85 billion yen, about 6 percent more than what the Company forecast back in October Sony said. Quarterly operating profit for the business was 40.2 billion yen.
It’s now sharpening its focus on streaming and online game services by bringing its PlayStation hardware, software and network operations under one roof.
Sony has said it will launch PlayStation VR, a virtual reality headset, by June 30.
The company’s nearly 36 million-strong global base of PS4 consoles may give it an advantage over rivals like Facebook’s Oculus, which require a high-end computer to run content to the VR headset.
Sony can also leverage two decades of experience working with game studios and already has more than 100 titles in development.
Virtual Reality
About 7 million VR headsets will be sold by the end of 2016, according to market researcher IHS Technology. By 2020, the market is expected to reach $2.6 billion with 37 million headsets sold.
Both music and film turned in solid performances. The film division was its fastest-growing in the quarter, with revenue climbing 27 percent to 262.1 billion yen. Sony had the fourth-biggest hit at the North American box office in the quarter with “Spectre, which grossed $199 million, according to BoxOfficeMojo.com.
Adele’s latest album, featuring the hit “Hello,” helped propel music revenue 8 percent higher to 181.2 billion yen. Full-year earnings at the music division are now seen 14 percent higher than the company forecast in October.
While the new album was kept off streaming services, demand for other titles in Sony’s catalogue is helping revive the music industry, the company said.
Feeling Pain
“Thanks to services like Spotify and Apple Music, the music market is finally showing signs of rebounding,” Chief Financial Officer Kenichiro Yoshida told reporters in Tokyo on Friday. “Movies is another business we expect to contribute to profit growth. We will also continue to invest in TV production.”.
Sony’s devices unit however felt the pain of decelerating smartphone demand as markets matured and China slowed. It had a loss of 11.7 billion yen in the quarter after Sony took a 30.6-billion-yen impairment on its battery business. The full-year operating income forecast for the business was cut to 39 billion yen from 121 billion yen.
“Film and music are very much hit-and-miss and profit will vary greatly depending on whether there are hits like Adele or James Bond,” said Amir Anvarzadeh, a manager of Japanese equity sales at BGC Partners Inc. in Singapore. “Sony is in a very advantageous position for VR. With 37 million PS4s out there, they have a much better chance of growing this business.”
