Tue, Feb 05, 2019 - Page 6 News List

Weak PlayStation profits drag down Sony stocks

Bloomberg

Sony Corp reported weaker profits in the PlayStation business and cut its annual revenue forecast, triggering the steepest share decline in almost three-and-a-half years.

The stock fell 8.1 percent in Tokyo yesterday, the most since September 2015, after operating income in games fell 14 percent to ¥73 billion (US$666 million) for the holiday quarter. The Tokyo-based company sold 8.1 million PS4 consoles, down from 9 million a year ago, it said in a statement on Friday last week.

The PlayStation 4, headed for its sixth year, will likely surpass the 100 million unit sales milestone by the middle of this year, cementing it as one of the best-selling consoles in history. Even so, this year’s software lineup is not as impressive as it was last year, when blockbuster titles like God of War, Spider-Man and Red Dead Redemption 2 debuted. For the full fiscal year, Sony kept its forecast for the games division of ¥310 billion. Now, attention is turning to the details and timing of the next-generation console.

For total sales, Sony lowered its outlook to ¥8.5 trillion for the fiscal year through March, compared with the prior forecast for ¥8.7 trillion. Weaker demand for camera chips, mobile handsets and financial services were behind the revision although a tax adjustment will boost net income.

The figures underscore the struggle at big technology companies, which are seeing slowing demand for their products and services. Apple Inc reported a decline in revenue for the first time in two years, while chipmakers Intel Corp and Nvidia Corp have warned of weaker sales as China’s economy starts to sputter and looming uncertainly over Brexit.

“It’s definitely not as positive as the headline numbers would suggest. It feels slightly negative overall,” said Andrew Jackson, head of Japanese equities at Soochow CSSD Capital Markets in Singapore.

Sony’s operating profit in the last three months of last year was ¥377 billion, compared with analysts’ projection for ¥365 billion. After adjusting for a one-time gain in the music business, the result was significantly lower, at ¥260 billion. Quarterly sales fell 10 percent to ¥2.4 trillion.

The mobile division continued to struggle, with an operating loss of ¥15.5 billion during the quarter, the fourth straight period. Chief executive officer Kenichiro Yoshida has so far rebuffed pressure to sell off the unit, saying it is vital for pushing innovation including 5G research.

“The market is closely watching for a turnaround in the mobile communications business, but it looks things are worse year-on-year due to a decrease in smartphone unit sales,” Jackson said.

Sony’s camera chips business is also seeing an impact from slowing global demand for smartphones. Operating profit in chips fell 23 percent to ¥46.5 billion. Guidance for the division is now lower, at ¥130 billion for the current fiscal year, from October’s forecast of ¥140 billion.

“We are cautious, but not overly worried about CMOS despite iPhone weakness,” Jefferies LLC analyst Atul Goyal wrote in a report last week.

The company’s new 48-megapixel image sensor is proving to be a hit with manufacturers including Xiaomi Corp (小米) and Huawei Technologies Inc (華為), who are promoting it as a key feature in their new models.

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