Sony posts record Q1 profit as new strategy lift its game

Japan’s Sony on 31st July reported a record first-quarter operating profit on the back of strong sales of gaming software, giving support to the new management’s strategy of focusing on stable sources of revenue.

The electronics firm posted profit of 195.0 billion yen ($1.75 billion) for April-June, up 23.7 per cent from 157.6 billion yen a year prior. The result compared with the 145.23 billion yen average of eight analyst estimates compiled by Thomson Reuters.

With the previous year’s one-time gain of 36.8 billion yen excluded, Sony logged even sharper first-quarter growth of 61 per cent. That gain came from the sale of Sony’s camera module unit and the receipt of insurance payouts for earthquake damage.

When earnings in the year ended March exceeded the previous peak set in 1998, Sony pledged to maintain high profit levels to prove last year’s record profit was not a one-off.

To that end, Sony has been expanding businesses that promise stable revenue streams, such as online gaming services and music content libraries, while minimizing the impact of the volatile sales cycles of game consoles and other electronic gadgets.

Under that strategy, the gaming business saw profit increase to 83.5 billion yen in the three months ended June from 17.7 billion yen a year earlier, as high-margin online software and new first-party titles such as “God of War” and “Detroit: Become Human” compensated for slowing sales of PlayStation 4 consoles.

Analysts said the game “Marvel’s Spider-Man”, to be launched in September on PlayStation 4, could further lift gaming profit.

Sony’s semiconductor division, which includes imaging sensors, posted profit of 29.1 billion yen, down from 55.4 billion yen a year earlier when earnings were boosted by the camera module business sale and insurance payouts.

The electronics maker sees sensors as a pillar of growth in the medium and long term, as applications are likely to expand to depth sensing, surveillance, factory automation and automobiles.

Sony lifted its annual profit outlook for the gaming business and semiconductor business by 60 billion yen and 20 billion yen, respectively.

It kept its profit forecast for the year ending March at 670 billion yen, down 8.8 per cent on year, citing various potential risks including competition in smartphones. That compared with the 754.66 billion yen average of 24 analyst estimates.

Ahead of the stronger-than-expected first-quarter results, many analysts said the full-year outlook was too conservative.