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Abu Dhabi, UAESunday 19 August 2018

Sony in rude health as record profit beats estimates

Japanese electronics firm gains from its high-margin online software and new games such as "God of War" and "Detroit: Become Human"

Screenshot of Sony's 'God of War'. Games and software helped the firm boost earnings. Courtesy Sony
Screenshot of Sony's 'God of War'. Games and software helped the firm boost earnings. Courtesy Sony

Japan's Sony on Tuesday 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 billion (Dh6.42bn) for April-June, up 23.7 per cent from ¥157.6bn a year prior. The result compared with the ¥145.23bn average of eight analyst estimates compiled by Thomson Reuters.

With the previous year's one-time gain of ¥36.8bn 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 minimising the impact of the volatile sales cycles of game consoles and other electronics gadgets.

Under that strategy, the gaming business saw profit increase to ¥83.5bn in the three months ended June from ¥17.7bn 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.

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Sony's semiconductor division, which includes imaging sensors, posted profit of ¥29.1bn, down from ¥55.4bn 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 ¥60bn and ¥20bn, respectively.

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

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

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