Sony who is about to have another crack at getting traction in the Australian smartphone market has reported shocking results for their mobile operation.
Overnight Sony’s Mobile & Communications division reported that revenue had declined a further 16.3% to US$2.3 billion.
The big savour for Sony was the popularity of their PlayStation business which delivered sales of $2.4 billion and a $160M profit. In Australia Sony’s gaming business operates as a totally separate business unit from the struggling Sony consumer products division.
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Overall Sony saw a threefold increase in its first-quarter profits as booming demand for image sensors used in Apple’s iPhones helped to offset losses in its smartphone and their movie businesses that is still recovering from the their latest hack attack.
The stronger than expected results on Thursday support a growing view among investors that the Japanese electronics and entertainment group is starting to turn a corner with its decade-long restructuring effort nearing completion.
Sony reported a net profit of US $664m in the three months to the end of June.
The result was also double analysts’ forecasts for a profit of Y40.26bn, although the profit recovery was aided by the sale of shares in Sony’s logistics business and medical equipment maker Olympus.
During the three-month period, sales of camera sensors used in the latest iPhone 6, Samsung Electronics’ Galaxy S6 and Chinese handset maker Xiaomi’s Mi4 handset jumped 62 per cent from a year earlier.
Sony lowered the full-year sales target for smartphones – set only three months ago – from 30m units to 27m, citing increased competition.
It now expects its annual loss in the division to expand to Y60bn from a loss of Y39bn projected in April.
Kenichiro Yoshida, Sony’s chief financial officer, cited higher component costs due to the euro’s slide against the US dollar.
To address the cost burden, Sony has already cut jobs in the mobile division, scaled back its line-up of handsets and raised prices in Australia.
Rival Samsung Electronics also reported weak quarterly results following disappointing sales of its flagship Galaxy S6 handset and a dramatic loss of market share in China, the world’s biggest smartphone market.
Analysts questioned Mr Yoshida on whether Sony is prepared for further downside risks in handset sales. “The market volatility is bigger in mobile phones than television. There is a possibility sales could fall to 25m or 23m units,” Eiichi Katayama, head of Japan research at Bank of America Merrill Lynch, said during the investors briefing.
Sony’s movie unit similarly disappointed: in the absence of any big box office hits, sales shrunk 12 per cent in the three-month period. The division also reported an operating loss of Y11.7bn.
“The new management is working on rebuilding the business but it will take some time before the results are visible,” Mr Yoshida said. Sony appointed Tom Rothman as chairman of Sony Pictures’ motion picture group, replacing Amy Pascal in the wake of last year’s cyber-attack on the movie studio.
Despite a downgrade in its outlook for mobile phones, Sony raised its full-year sales and profit targets for games and imaging products. That allowed it to keep intact its overall annual guidance for an Y140bn net profit, which would be its first return to the black in three years.
“We are clearly seeing the fruits of our structural reforms, but there is room for further improvement,” Mr Yoshida said.
In a last-ditch attempt to fix its mobile woes, Sony in October tried to shake up the division by appointing a new executive. The effort, which proved to be fruitless.
Sony believes that by focusing on gaming, devices, movies, and music, it can make billions of dollars in profit each year.
In February, the company said that by the end of its 2017 fiscal year ending in March 2018, it anticipates an operating profit of 500 billion yen (about $4.2 billion).
Sony so far appears to be on track.
