Sony on Tuesday reported a 1.1 percent decline in first-quarter operating profit, much milder than market estimates as its gaming business thrived while consumers locked down at home looked for entertainment and downloaded more games. The electronics and entertainment firm posted April-June profit of JPY 228.4 billion (roughly Rs. 16,180 crores), versus JPY 230.9 billion (roughly Rs. 16,355 crores) a year prior.
The result compared with the JPY 143.21 billion (roughly Rs. 10,144 crores) average of 10 analyst estimates compiled by Refinitiv. Sony also forecast profit to fall 26.7 percent to JPY 620 billion (roughly Rs. 43,915 crores) in the year through March 2021, its lowest in four years, but better than a drop of at least 30 percent it estimated in May.
The impact of the novel coronavirus on Sony has been limited compared with Japanese electronics peers such as Panasonic due to its pursuit of recurring revenue such as subscription fees on gaming content. To accelerate the portfolio shift to such revenue streams, Sony recently invested in Chinese video site Bilibili and Epic Games, creator of the popular video game Fortnite.
Sony forecast its gaming business to post a profit of JPY 240 billion (roughly Rs. 17,000 crores) for this financial year, versus JPY 238 billion (roughly Rs. 16,867 crores) a year earlier, driven by a sharp rise in software sales.
"Lockdowns have continued affecting Sony's production lines while hitting hard sales of its electronics products and at theatre-release movies," Hideki Yasuda, an analyst at Ace Research Institute in Tokyo, told AFP ahead of the results.
"It was quite a tough quarter for Sony, as negative factors outnumbered positive ones. Sony is still expected to recover gradually for the rest of the fiscal year but on the condition that a major second wave of the pandemic doesn't emerge."
If there is a serious resurgence of the virus, "it will be a different story," Yasuda warned.
The firm is scheduled to launch its PlayStation 5 console during the year-end holiday shopping season, seven years after its previous-generation games console. Analysts say the upcoming launch has helped to sustain the firm's share price.
While global demand for games downloads spiked this year as lockdowns forced people to stay at home, the pandemic has brought a string of negative factors for Sony, including a slump in manufacturing, music event cancellations and movie theatre shutdowns.
It expects its image sensor business, which supplies camera sensors to global smartphone makers including Apple and Huawei Technologies, to report profit of JPY 130 billion (roughly Rs. 9,212 crores), compared with JPY 235.6 billion (roughly Rs. 16,692 crores) a year earlier.
The worldwide smartphone market is forecast to decline 12 percent year over year in 2020, according to researcher IDC, even though the impact of the shrinking market on Sony would be partially offset by smartphone makers' adoption of multiple-lens cameras.
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