New York: Sony Corp’s quarterly profit 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 yen ($1.4 billion) in the fiscal first quarter that ended in June, beating analysts’ average projection for 133.3 billion yen. Net income was 80.9 billion yen, exceeding the prediction for 66.5 billion yen.
After a tumultuous year that included an earthquake that crippled camera-chip production and a $1 billion write-down 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. Investors are betting that more predictable, stable profits will deliver buy-backs and higher dividends.
“PS4 continues to grow which allows them to sell more games, while recurring revenue from their PlayStation Network is hitting full stride,” Kiyoto Utsumi, an analyst at Tachibana Securities Co., said before the release. “Hirai’s background is in the entertainment divisions, and we’re seeing him begin to successfully manage the music and films businesses.”
Sales rose 15 per cent to 1.86 trillion yen, beating the prediction for 1.73 trillion yen.
The shares of Sony fell 1.8 per cent ahead of the results, leaving them up 36 per cent this year.
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 yen. Declining insurance and recovery costs related to the April 2016 earthquake in Kumamoto also provided a one-time benefit of 9.3 billion yen.
Games, the biggest division, had a sharp drop in operating profit, which the company blamed on a lack of new first-party titles. Operating profit declined 60 per cent to 17.7 billion yen, even as sales rose 5.4 per cent to 348.1 billion yen. Sony sold 3.3 million PlayStation 4 units during the quarter, slightly down from 3.5 million last year. The company kept its forecasts to sell 18 million units this year unchanged.
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. Sony increased its full-year outlook for the division, to an operating profit of 180 billion yen on sales of 1.98 trillion yen.
Operating profit in chips was 55.4 billion yen, recovering from a loss a year earlier, as demand from phone makers increased due to the rising popularity of multiple-sensor models. Sony controls about half of the market for image sensors, the chips that convert light particles into digital photos and videos.
“Demand for Sony’s imaging sensors has been rising further, principally for smartphone use in China,” Deutsche Bank AG analyst Mio Shikanai wrote in a report to clients.
In music, where operating profit grew to 25 billion yen, Sony benefited from its partnership with Spotify Ltd., which has tripled paying subscribers to 60 million in the past two years. The two companies struck a new licensing deal which will see more of Sony’s music available only to paying Spotify users, the Financial Times reported last month.
