Abu Dhabi, UAESaturday 25 May 2019

Sony stock jumps after first-ever share buyback announcement

Japanese company has reinvented itself as an entertainment firm with stable revenue from music content and gaming

Sony has cut its outlook for imaging sensors, citing weakness in the global smartphone market. Bloomberg
Sony has cut its outlook for imaging sensors, citing weakness in the global smartphone market. Bloomberg

Tokyo-headquartered Sony announced its first-ever major share buyback on Friday, worth 100 billion yen ($910 million), helping its stock recover from a hammering days earlier when investors freaked over lacklustre earnings.

The announcement marked Japan's second major buyback this week after tech investor SoftBank scheduled the repurchase of 600 billion yen in shares using proceeds from the IPO of its telecoms unit, sending its stock price soaring.

Japanese firms have been increasing buybacks as investors call for higher returns. The amount of buybacks announced by listed companies has jumped around 2.5 times over the past five years, according to financial data service firm I-N Information Systems.

In the past week, buyback announcements have accompanied the earnings reports of instruments maker Yamaha, trading house Itochu and energy firm JXTG Holdings.

Sony said its buyback, its first ever aimed at boosting shareholder returns, will be equivalent to 2.36 per cent of its outstanding shares and will be conducted through March 22. Its shares closed 4 per cent higher at 4,906 yen on Friday.

"Our financial health has improved enough to conduct the repurchases," a Sony spokesman said, adding that recently low share prices were also a factor in this decision.

Sony shares plunged 14 per cent to their lowest in over a year after the firm reported sagging numbers in its previously thriving gaming business. Sony also cut its outlook for imaging sensors, citing weakness in the global smartphone market.

Analysts nevertheless applaud Sony's turnaround in the past few years spearheaded by Kenichiro Yoshida, first as chief financial officer and, since last year, as chief executive. The firm struggled for profitability as its consumer electronics business lost market share to Asian rivals, before reinventing itself as an entertainment firm with stable revenue from music content and gaming.

Hiroyasu Nishikawa, senior analyst at IwaiCosmo Securities, said the buyback showed how Sony had become more sensitive to investors in recent years.

"This announcement was well timed, and it shows it's watching the market very well," he said.

Updated: February 8, 2019 05:36 PM

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