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Why Sony's profit turnaround may be a 'one-off'

David Becker | Getty Images News | Getty Images

Japanese electronics giant Sony served up a rare piece of good news this week, posting a quarterly profit for the first time in three years and signaled better times ahead by hiking its full-year forecast.

Thursday's announcement may have cheered markets - Sony shares rose as much as 4 percent in Friday's Tokyo session - but industry watchers remain unconvinced about its profit turnaround.

Sony made a net profit of 3.5 billion yen ($35 million) in the April-to-June quarter, compared to a 2.46 billion yen loss in the year ago period. The firm attributed the gains to a weaker yen, which has declined around 15 percent against the dollar this year, and a rise in smartphone sales at home.

(Read more: Sony forecasts profit to hold steady this year after return to black)

But the maker of PlayStation consoles and Bravia TVs acknowledged the harsh market conditions for consumer electronics, cutting full-year sales targets for products from PCs to televisions to video cameras, and left its full-year profit forecasts unchanged even as it lifted its revenue forecast more than 5 percent.

Paul-Jon McNealy, CEO and founder of Digital World Research, said Sony's profit is a "one-off" and masks the tech giant's fundamental flaw, which is that its vast electronics business remains weak.

(Read more: Change at Sony: Start of third leg of Abenomics?)

"The problem is it's a one-off uplift. This was the best quarter in three years for all Japanese consumer companies, not just Sony, and it was hugely driven by the yen," said McNealy.

Even Sony's decent performance in its mobile business, which surged 36 percent over the quarter, can't mask the fact that the company is struggling to compete on a global scale, McNealy added, noting that boost in the mobile division was mostly due to the sale of smartphones to domestic consumers.

"Companies like Sony will always sell well in Japan as it's a captive market," said McNealy, adding that the tech giant, like many of its Japanese peers, have had in recent years experienced trouble with successfully exporting their brand overseas.

(Read more: Is Sony 'un-Japanese' enough to entertain change?)

"Sony is in a really tough spot. This is a fundamental flaw with the Japanese consumer electronics culture," he said.

Missing the big hit

Japan's electronics empire has been crumbling in recent years, plagued by stiff competition and lack of innovative products. Its steady downfall has prompted activist shareholder Daniel Loeb to propose that the company be split into two, by spinning off its money-making entertainment arm to make it more transparent and accountable.

Sony is expected to reject the proposal, and its positive earnings results are viewed to support its case against a spin-off.

(Read more: Third point lifts Sony stake, urges spin off)

Still, according to a report from Fitch ratings agency on Friday, while the return to profit is a step in the right direction, Sony is still struggling to "reclaim technology leadership in key products, to "capitalize on its brand and improve profitability."

McNealy agrees that Sony needs to revive its brand image, and the only way is through a big hit product, similar to what iPhone's done for Apple.

"Sony really needs a big hit product in its consumer and electronics division. It needs the PlayStation 4 to wildly outperform the PS3 or it needs its TV division to rally and gain strength again," he said.

(Read more: Did Sony say enough to hype PlayStation 4?)

"But until Sony discovers the coolness factor, no one in North America or Europe is thinking 'gosh I can't wait for the new Sony smartphone to come out,' over the next Android or iPhone device," McNealy said.

—By CNBC's Katie Holliday: Follow her on Twitter @hollidaykatie

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