Sony Profit Beats Estimates as Weaker Yen Boosts Overseas Sales
Sony Corp. (6758), considering Daniel Loeb’s push for a partial sale of its entertainment assets, posted first-quarter earnings that beat estimates after cutting costs, introducing new smartphones and benefiting from a weaker yen.
Net income totaled 3.48 billion yen ($35 million) in the three months ended June 30, compared with a loss of 24.6 billion yen a year earlier, the Tokyo-based company said in a statement today. Profit was expected to be 2.6 billion yen, according to the median estimate of five analysts surveyed by Bloomberg News.
Sony raised its full-year revenue forecast 5.3 percent on the weaker yen while cutting expected sales of televisions and digital cameras as it considers Loeb’s plan for an initial public offering of the entertainment units. Chief Executive Officer Kazuo Hirai is preparing to release the PlayStation 4 this year to drive game earnings as it loses ground to Samsung Electronics Co. (005930) and Apple Inc.
“It’s tough for the company because it has products cannibalizing each other’s demand — such as cameras, camcorders, smartphones, games, TVs,” Yasuo Nakane, a Tokyo-based analyst at Deutsche Bank AG, said before the announcement. “Sony is improving operations but the speed of migration of consumers to mobile products is faster.”
The sales forecast was increased because of the yen, Chief Financial Officer Masaru Kato said.
Sony rose 1.7 percent to 2,104 yen at the close in Tokyo trading before the announcement. The stock has more than doubled this year while Japan’s benchmark Topix index had added 35 percent.
Operating Profit
Operating profit, or sales minus the cost of goods sold and administrative expenses, was 36.4 billion yen Sony said.
Loeb’s Third Point LLC, with funds that control about 6.9 percent of Sony stock, said in May it wanted the Japanese company to sell as much as 20 percent of its entertainment assets in an IPO to improve its performance and raise cash to revive electronics.
Sony’s board raised objections to Loeb’s plan and may issue a formal rejection soon, the Nikkei newspaper reported today.
Sony, which lost 762 billion yen selling TVs in the past nine years, dropped to fifth in revenue share from flat-panel TV sales during the January-March quarter as it was overtaken by China’sTCL Multimedia Technology Holdings (1070) and Sharp Corp. (6753), DisplaySearch said in a statement in June. Sony was the world’s No. 3 TV maker last year.
4K Televisions
The company in April started selling a 55-inch model using a technology its dubs 4K for $5,000 after introducing an 84-inch model for $25,000 in November. While the company is reducing its model lineup to cut costs, Sony is moving into the niche between conventional liquid-crystal display sets and those using organic light-emitting diode panels that have four times the detail of high definition.
In smartphones, Sony didn’t rank among the top five vendors during the April to June quarter, researcher IDC said last week. Samsung controlled 30 percent of the global market, which expanded 10 percent when compared with the previous quarter. South Korea’s Samsung was followed by Apple, LG Electronics Inc. (066570), Lenovo Group Ltd. (992) and ZTE, IDC said.
Sony’s smartphone market share in the first three months of 2013 stood at 3.8 percent, little changed from 3.6 percent a year earlier, according to data compiled by Bloomberg.
“Sony is boosting new lineups such as 4K TVs but the revival of the electronics operation is yet to be seen,” said Junya Ayada, an analyst at Daiwa Securities Co. in Tokyo. “TV sales aren’t probably exceeding the company’s target, while demands for camcorders and cameras are worsening.”
Film Flops
The company has had setbacks in films as its Hollywood studio, the U.S. box-office leader last year with $1.8 billion of gross ticket sales, has fallen to sixth this year so far, according to researcher Box Office Mojo.
“White House Down,” an action movie with Channing Tatum and Jamie Foxx, was made for $150 million and garnered about $116 million in global ticket sales. “After Earth” starring Will Smith had a production budget of $130 million while generating about $242 million in worldwide sales. Production budgets don’t include spending on marketing and studios typically split box-office receipts with theaters.
The duds prompted Loeb to devote more than half of Third Point LLC’s quarterly investor newsletter to Sony, as he slammed the flops and “high salaries for underperforming senior executives.”
He praised Sony’s rollout of the PS4, which is due to be released for the Christmas shopping season starting at $399.
As TVs struggle, the company is also battling pressure in its camera unit as more consumers take pictures with their smartphones. Last week, Canon Inc. (7751), the world’s biggest camera maker, cut its annual profit and sales forecasts as worldwide industry shipments of cameras fall to a 10-year low.
Samsung, the world’s biggest maker of TVs and smartphones, last week posted quarterly earnings that missed analyst estimates as market saturation for high-end handsets curbed sales growth for its flagship Galaxy S4. Apple reported third-quarter profit and sales that beat analysts’ estimates July 23.
Source: Bloomberg
