2020 Profit Forecast Raised By Sony After Record Q2 Performance

After reporting a record profit for its second quarter, Japanese electronics giant Sony Corp raised its annual profit outlook. The company’s performance as driven by its gaming business which continued to capture “nesting” demand just ahead of the next month launch of the next-generation PlayStation 5 (PS5) console.

A strong start for Japanese animated film “Demon Slayer”, co-distributed by Sony’s music unit, was also reflected in the upward revision of the forecast by the company. Since “Demon Slayer” as released in Japan on October 16, it has been shattering box-office records in the country. 

The strategy of the company’s Chief Executive Kenichiro Yoshida to increase the number of streams generating recurring revenue was in a way validated by the higher revenue generated from the company’s gaming and entertainment content. The recurring revenue streams helped the company to offset the impact of the volatile hardware sales cycles of thee company.

Company’s chief financial officer Hiroki Totoki said at a briefing the company is targeting sales of 7.6 million units or more in its financial the year that ends in March next year for its PS5 consoles as the executive pointed out to the sales that had been achieved by its PS4 console when it was launched seven years ago.

However tighter sanctions by the United States on the Chinese tech company Huawei Technologies Co Ltd could also cause a major damage to its prized image sensor business, Totoki also warned. The US sanctions on Huawei essentially banned all global suppliers from selling it chips – as done by Sony – that is manufactured using US technology without getting a special licence from the US administration.

According to analyst estimates, accounting for about 20% of its $10 billion in sensor revenue, the Chinese smartphone maker was the second-largest image sensor customer for Sony after Apple Inc.

Totoki said that it would not be before the year through March 2023 that a full recovery in profitability at the image sensor business would be possible, despite efforts to diversify the company’s customer base.

“It will take considerable time until other customers adopt the trend of high-performance, large-sized sensors led by the Chinese customer,” he said.

After reporting an increase in its July-September profit to 317.76 billion yen which is a second-quarter record for the company and which surprised analysts and markets, Sony raised its annual profit forecast by 13 per cent to 700 billion yen ($6.7 billion).

In comparison, after reporting a surprise increase in July-September profit to 317.76 billion yen, a second-quarter record had estimated the quarterly profits to come in at 672.33 billion yen.

Compared to its previous estimate of 240 billion yen, an annual profit of 300 billion yen is now expected to be achieved by its gaming division, Sony now expects. 

Despite Sony’s PlayStation 4 console coming to the end of its lifecycle, its profits have been boosted by the shift in consumer preference for downloading of gaming software and online subscription services during coronavirus lockdowns.

(Adapted from SG.News.com)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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